The world is full of threats and uncertainties. Risks can take many forms, including the unpredictability of bad things happening to people's lives, well-being, resources, and property. Insurance has developed to compensate for loss and uncertainty to protect interests from disaster and vulnerability. It might be portrayed as a societal tool to reduce or eliminate the danger of harm to life and property.
In addition to shielding individuals and businesses from various anticipated hazards, insurance significantly contributes to the nation's overall financial development by ensuring secure interactions. Additionally, the insurance sector improves the quality of personal savings and employs millions of people, particularly in countries like India, where savings and employment are essential. Unfortunately, insurance fraud is a significant possibility because of all these advantages. In India, there were over 45,000 crores worth of insurance frauds committed in 2019. Fraudulent health insurance claims can range from 15% to 35%, and overall, insurance firms often lose 10% to 15% of their revenue.
India is one of the world's largest markets for insurance companies. However, it should be understood that doing business in health insurance in India carries some dangers due to an abnormally high prevalence of fraud.
India has Five Significant Categories of Health Insurance Fraud
- Application Fraud: Here, while fully aware of the circumstances, the insured person inputs false information regarding his pre-existing conditions, date of birth, claims history, etc. For instance, a policyholder may provide an incorrect date of birth or fail to disclose an illness to reduce their premium or increase their coverage. Even firms that offer health insurance to their workers occasionally give the wrong joining dates to lower the rate.
- Ineligibility Fraud: It involves offering the insurance provider false information regarding the employee's date of birth, employment status, medical conditions, pre-existing diseases, nominee, etc. For instance, by fabricating fake records in the HR department, a worker who only works part-time for the company and does not hold a full-time position there may be covered by the employer's health insurance plan.
- Claims Fraud: This kind of fraud occurs when the insured claims a health benefit to which, according to the policy's terms and conditions, he is not entitled. Both the insured and the service provider are considered to cooperate in these circumstances. Therefore, policyholders have the same option to purchase various insurance plans from multiple insurers and submit claims to each of them.
- Opportunity and Deliberation Fraud: Intentional fraud is committed when a person presents the insurance company with false information about an ailment, injury, or condition covered by the policy. On the other hand, a policyholder who pushes a legitimate claim too hard and provides incorrect information about a pre-existing ailment attempts to open the door for fraud.
- Internal and External Frauds: A false claim made to the insurer by the beneficiary, policyholder, or service provider is called external fraud. Employees of the company commit internal fraud alongside the insured.
How Do Frauds Happen?
Fraudsters are getting more creative all the time. Nearly every day, new schemes to scam insurance companies are used. Purchasing insurance for someone terminally ill is the most typical method of tricking a corporation. Cities in India will avoid this from happening. Rural India, however, lacks a lot of infrastructures, making it simple to secure patient insurance. Doctors who check for pre-existing diseases are threatened or offered money. The doctor will write a report stating that the patient is eligible for insurance if they have cancer. The insurance funds are later misused when the patient passes away from cancer.
In India, insurance firms offer consumers compensation; in the event of a fatal accident, the amount of compensation is double the insurance. This provision has sometimes been misused to make false claims. When an insured person passes away naturally, survivors may claim that the death was an accident. Doctors and nurses may once more be threatened with acquiring pertinent records, resulting in significant losses for the insurance company.
Fraud can occur in the insurance industries of health and auto. In these situations, counterfeiting is commonplace. Many hospitals in India exist just to produce fictitious paperwork for insurance claims. The con artists pack up and leave the area to start over somewhere else before the insurance company can figure out what happened.
Pre-medical exams, timely renewals, compliance with KYC procedures, and improved services from the insurance business are some of the countermeasures for fraud across the entire insurance value chain. All insurance companies registered in India are obliged to have an anti-fraud policy officially authorised by their separate boards, according to guidelines released by the Insurance Regulatory and Development Authority of India (IRDAI).
How are Insurers Dealing with Such Frauds?
- Stringent regulations and requirements for setting up clinics and procuring drugs for severe illnesses.
- Creating a focused data collection of all reported fraud occurrences will allow for the detection of foreseen trends involving the petitioner and the specialist co-op.
- A dedicated "extortion anticipation unit" takes part in field investigations to examine potential cases.
- More effective and transparent systems are being created to reduce unnecessary delays.
- The expense the other client would incur is one of the worst consequences of any protection deception. Furthermore, the rise in fakes could increase administrative costs due to the idea of pooling changes in the area. Additionally, settlements would be delayed if cases were subjected to a stricter investigation. Furthermore, at least once, this fraud could raise questions over any instances of accidental insurance claims to the clients.
Conclusion
Insurance companies are making every effort to combat the adverse effects of extortion, and progress in technology could help them win the war. Legal assistance from the government in the form of suitable corrective legislation to combat such crimes would also help organisations reduce the number of fraudsters. India urgently needs an insurance fraud law to prevent all forms of insurance fraud both domestically and internationally.
