Insurance Frauds in India - How to Avoid

06 May 2024
7 min read
Insurance Frauds in India - How to Avoid
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Insurance fraud is any deceit perpetrated by a person or a group to receive an insurance claim to which they are not legally entitled.

Insurance fraud is a significant issue impacting insurance firms and policyholders in India.

Moreover, the problem of insurance frauds in India has gotten worse in recent years, with false claims totalling billions of rupees every year. As rates have had to rise and underwriting requirements have been stricter, it is now more challenging for honest consumers to get coverage.

In this blog, we have listed information about the many sorts of insurance fraud in India and how to avoid becoming a victim.

So, let's get going and learn more about this vital subject! 

Understanding Types of Insurance Fraud

Insurance frauds in India can take many different shapes, often occurring in several ways.

Following are a few of the most typical examples of insurance frauds that occur in our country-

  1. Bogus or Misleading Claims

To gain a greater reimbursement from the insurance company, policyholders or beneficiaries may often create inflated or fraudulent claims, one of the most prevalent examples of insurance frauds.

Health insurance policyholders may submit fictitious medical bills, invoices, and receipts to raise the number of claims. In addition, policyholders in the vehicle insurance industry may manufacture an accident or falsify evidence of an accident to submit a false claim.

  1. Fabricated Accidents 

Fabricated Accidents are often on the list of the top 10 insurance frauds.

In this kind of fraud, the policyholder intentionally creates an accident or makes it seem as though one has occurred to submit a false claim.

Policyholders might simulate an accident in several ways, including producing a rear-end collision, purposefully running into a stationary item, or making up an event they weren't involved in.

The policyholder may then make fictitious or exaggerated claims for harm done to their car or injuries incurred in the collision.

Interesting Fact to Know

According to research, Indian Insurance Sector loses more than Rs.30,000 crore yearly due to insurance fraud.

  1. Falsified Records

This happens when policyholders provide false information on their coverage applications or claims, including made-up invoices and receipts, fake bills, and made-up medical records.

In this kind of fraud, policyholders or claimants submit fraudulent or inaccurate statements on their insurance applications or claim forms, including falsified invoices, receipts, fictitious bills and medical documents.

The health insurance industry is rife with fraudulent documents. For example, policyholders may artificially fake medical records or receipts to exaggerate the cost of their claims.

  1. Premium Deviation

This occurs when a broker or agent accepts policyholder premium payments but does not send them to the insurance provider, causing the policy to expire.

The life insurance and health insurance industries frequently engage in premium diversion. For example, premiums brokers may divert premiums for personal benefit or to compensate for losses they have suffered. Moreover, they could pay for other insurance premiums with the diverted money or keep up the image of a flourishing company.

  1. Phantom Regulations

This fraud is common in the life insurance and health insurance industries.

This occurs when a broker or agent offers fictitious policies to customers to recoup premium payments without providing the promised coverage.

Agents or brokers may issue phantom insurance to collect premiums for their benefit or to keep their firm afloat. Those not qualified for coverage, including those with pre-existing medical issues, may also be given plans through these companies.

  1. Numerous Assertions

This occurs when policyholders submit several claims—often with separate policies or insurers—for the same loss or damage.

In the field of property insurance, fraud of this kind is common. For example, policyholders may submit repeated claims to increase their insurance company's compensation or to replace or fix goods that weren't genuinely lost or destroyed. Also, they can submit several claims to various insurance carriers for the same loss or damage to get multiple rewards.

You may also want to know the Best Life Insurance Policy in India

  1. Identity Fraud

The health insurance and vehicle insurance industries are heavily affected by identity theft.

In this kind of fraud, thieves use the victim's identity to buy insurance policies or file false claims in the victim's name.

Criminals may submit fake claims using stolen identities for medical care or procedures they never obtained, and for accidents or injuries they never suffered. Also, they could buy insurance coverage for which they are ineligible by using stolen identities.

Thus, you must know about various insurance scams to protect yourself and your money.

6 Ways to Avoid Insurance Fraud

Both insurance firms and policyholders may prevent insurance fraud in several ways.

Here are a few of these ways to help you understand how to avoid insurance fraud-

  1. Inspect Every Detail of the Insurance Provider

  • Always check the legitimacy of an insurance caller. Be sceptical of suggestions that would have you give up current insurance coverage in favour of one that seemed more alluring.

  • Avoid promises of rewards, incentives, or perks made by a stranger or if they appear too good to be true.

  • To validate the insurance policy details, contact the insurer directly. You may do this by email, getting the insurer's customer service number, or checking the policy on the insurer's official website.

  • Clarify with the insurer whether the premium given is less than usual. Never authorize an agent to complete policy documents or sign blank claim forms. Do not feel pressured by offers that are time-sensitive or have a short deadline.
  1. Avoid Paying Premiums With Cash

Do not pay the premium directly to the insurance agent or agency if you're paying with cash; instead, pay the insurance company at a branch.

Pay the premiums online, with a cheque, or with a credit card to be sure the insurance provider receives them. Always ask for valid receipts for every premium you pay.

  1. Do Not Share Sensitive Information or Documents

Aadhar, PAN, passport, and insurance numbers should never be shared with a stranger or a third party.

Genuine general insurance providers would not need original copies of your documentation. Never sign blank cheques or divulge private information about one's life or insurance policies.

Do not divulge any OTPs, account logins, or passwords to the insurance business representative or your insurance agent.

  1. Read All Policy Details Thoroughly

Please carefully examine the insurance policy specifics to verify the qualifications and policy coverage information.

Before completing the form, confirm the policy's specifics. Never certify an unfinished proposal form.

o prevent the trap of phoney insurance policies, purchase insurance policies straight from the insurance company or via authorized intermediaries.

  1. Be Sure to Write Your Policy Documents

To prevent insurance fraud, you should complete the policy documentation if you buy insurance offline.

If an agent is filling out the policy document on your behalf, read and understand the terms and conditions, inclusions and exclusions, and check for spelling mistakes, omissions of information, and factual errors.

You should always read policy papers thoroughly before signing them.

  1. Prefer Internet Insurance Policy Acquisition

You may buy insurance plans online if you would instead do so and eliminate the danger of insurance fraud and dealing with an agent. This will eliminate the intermediary and ensure a simple and secure transaction.

Follow the payment instructions carefully and keep your credit card information private.

Conclusion

Insurance fraud is a serious issue in India and can result in significant financial losses for insurance providers and policyholders.

Nonetheless, there are efforts that insurance firms and policyholders may take to stop and identify insurance fraud. 

Lastly, we can collectively cooperate to encourage openness and justice in the insurance sector and safeguard ourselves against the substantial financial losses linked to insurance fraud.

You May Also Be Interested to Know-

1.

Best Health Insurance Plans in India

2.

Difference Between Life Insurance and Health Insurance

3.

Best Term Insurance Plan in India

4.

Best Child Insurance Policies in India

5.

Everything You Should be Knowing About Insurance Premiums

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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