FRAUDS IN INSURANCE

INTRODUCTION TO FRAUDS IN INSURANCE

What Are Frauds?
In a broad strokes definition, fraud is a deliberate
misrepresentation which causes another person to suffer
damages, usually monetary losses. Most people consider the act
of lying to be fraud, but in a legal sense lying is only one small
element of actual fraud

DIVISION OF INSURANCE FRAUD

The Division of Insurance Fraud was originally formed in 1976 to
investigate only fraudulent automobile tort claims. In the early years,
investigators had arrest powers but could not carry firearms. Today, the
division investigates all types of insurance fraud crimes.
Investigators are assigned to work general fraud cases, workers
'compensation fraud, medical and health-care fraud, and agent and
company fraud. Areas of assignment may include:
Insolvency - Fraud committed by insurance companies that fail financially
due to internal fraud by owners and corporate officers.
Unauthorized Entities - fraud, both criminal and civil, committedly
insurance companies operating illegally in the state.
Health Care Fraud - focuses on organized medical and healthcare scams.
Workers Compensation - investigates employers for workers
'compensation premium fraud.

PRECAUTION IS BETTER THAN CURE

Insurance fraud is not typically a violent crime, just a lucrative one. As
consumers, there are several common-sense steps you can take to help
reduce fraud and minimize its impact.
Be an informed consumer: - Generally speaking, the greater the risk, the
higher the premium.
Comparison Shop: -Premiums can vary significantly from insurer to
insurer so it pays to shop around
Know your Agent or Broker: -Consumers can often be victimized by
unscrupulous agents or brokers and discover only after they file a claim
that they are without coverage fortheir home or their car.
Where's the Proof? :- Never pay for a premium in cash. Pay by check or
a money order made out to the insurance company directly or to the
agencynot to the individual agent or broker. In addition, always
request a receipt.

MEANING OF INSURANCE FRAUD

Insurance fraud is any deliberate deception
perpetrated against, or by, an insurance
company or agent for the purpose of
unwarranted financial gain.
Insurance fraud occurs during the process of
buying, using, selling and underwriting
insurance.

CAUSES OF INSURANCE FRAUDS

1. The chief motive in all insurance crimes is financial profit.
2. Many times it is observed that false insurance
claim.
3. This allow fraudster to file claims for damages that
never occurred and so obtain payment with little or
no initial cost.
4. To attract maximum customers towards the insurer
than competitors .
5. With intention of concealing true information W.R.T.
age, dieses, etc.

TYPES OF INSURANCE FRAUDS

Many times insurance frauds exist from
scamming whether it is auto insurance, life or
property.
Hard fraud
Soft fraud
Internal fraud
External fraud

1.Hard Fraud :- It includes someone staging a

car accident, injury, arson, loss, break. In or
someone writing false bills to medicate to
illegally receive money from their insurance
company.

2. Soft Fraud :- This is more difficult to detect.

It happens when a person paid their
insurance claim by telling White lies.

It is divided in following type of frauds

i. Automobile insurance fraud there are
numerous type of automobile fraud claims
such as
a)Failing a false theft export
b)Filling a false injury report
c)Filling a false accident report
d)Filling a false damage report

ii. Life insurance fraud following are ways through

which fraudster commits fraud in life insurance.
a) The most common kind making deliberate miss
statements on application for insurance.
b) It is observed that many times the information
provided by the policy holder is fake or incomplete
with the intention of hiding truth. eg. Age factor
hereditary problems

c) Doctors will get involved in LIC fraud by acting as

medical examiner that certify the health of people
applying with person seeking health insurance they
deliberately falsify information on medical exams.

d) Vertical frauds in this agents recruits people

with terminal illness to buy numerous policies. But
the majority of funds of policy holder death will
end up in the investor.

iii. Health insurance frauds :fraudulent behaviour designed to solicit money

person or group is not entitled is called as health
insurance by flowing e.g. we can commit frauds
a) Falsification of information on forms.
b) Filling of false claims treatment for patients
that never occurred
c) Filling of prescription under patients names
and then self then in the black market.

iv. Property insurance :This is a wider area of insurance frauds different losses
i.e. fire, marine, burglary, theft etc.
a) Obtaining payment that is worth more than the value
of the property or to destroy a subsequently receive
payment for goods that couldnt otherwise sold
b) Payment of exorbitant commission to the agents for
sales and advertisement of the policy by the insurance
companies

3. Internal frauds :There are those perpetrated against an insurance

companies or its policy holder by the agent manager
executives or other insurance employees for example

i. Fake / false documents

ii. False statements
iii. Pocketing premiums

4. External frauds :There are direct against an insurance by individuals

or entitles or diverse an policy holder medical
provides beneficiary vendor etc. it may followed
a) Disaster fraud

d) Creating a fraud claim theft report

c) Medical fraud
d) Falsifying a theft report

MEASURE TO PREVENT INSURANCE

FRAUD
Now a days it is necessary to adopt proper fraud
prevention programme to control the rising insurance
frauds
General measures
1) Awareness among the customer is very
important to giving proper training programmer
street play consumer farer
2) Role of Government is very important sectors of
insurance to take strict actions against frauds

3) Media can play important role in spreading of

awareness and knowledge through newspaper,
magazines, TV, radio
4) TRADA, SEBI, should prepare action plan to
combat with the serious issue of frauds
5) Policies authorities, CBI should take active lead
in tracking down in the cheater
6) It is necessary to organize collect and evaluate
the effectiveness of information so that the
management may avoid frauds.

Specific measure
1. It requires high standard of integrity from
director management and employees of
insurance organisation
2. It is necessary to set the realistic goals and
objective for the best use of resources.

MEASURE BY IRDA
There need for a uniform policy and standard which
will guide the action of employees within a insurance
company section 14 of IRDA act 1999 was lay downs
the power duties of IRDA
1. Specifying code of conduct for surveyors and loss
assuror
2. Promoting efficiency in the conduct of insurance
business
3. Laying fees and other charges for carrying out of
the purpose of this act

4. Issue to the applicant of a certificates f

resignations, renews, modify withdraw suspend or
cancel such
registration
5. Regulating investment of fund by insurance
company
6. Regulating maintenance of margin of solvency
7. Adjudication of disputes between insurer and
intermediaries or insurance intermediaries
8. Supervising the functioning of the Tariff advisory
committee

IRDA IS CODE OF CONDUCT FOR

AGENTS
1. As per the code, it would be necessary for those availing
insurance to fill in the applications themselves.
2. It is also mandatory for the agents to disclose on
demand the commission that they would be entitled to
from the proposal.
3. The provision inn the code to mainly avoid complaints
at a later stage, from the nominees of the insured
who at the time claim say that discrepancies could
have been avoided if the insure had filled in the
applications on their own.

MAJOR ACTIVITIES FOR AWARENESS

OF FRAUD
a) Promotion of a better understanding of non-life
insurance amongst the public.
b) Promotion of sound development and maintenance of
the reliability of the non-life insurance industry.
c) Presentation of the request and proposal.
d) Response to social issues e.g. combating automobile
theft.

e) Promoting dialogue and information exchange

with overseas insurance associations.
f) The GI council undertakes activities having for
reaching social implications in association with
law enforcement agencies.
g) The GI council promotes consumers
understanding of insurance and the presence of
general insurance industry in society.

THANK YOU