Organised crime in the insurance sectar all time high

Organised crime in the insurance industry with respect to fraudulent claims being filed, impersonating other people for claims and cause of death being changed for accidental death claims has reached an all time high.

With about 300 organised gangs operating in this space, tougher underwriting norms are being adopted.

Gangs have been operational in the insurance space for a long time. However, now their activities are getting murkier and they have begun to cause physical harm to investigating officers at time of death claim.

Now a days, often body guards are being sent with these officers, so that they are not threatened to word their report in a particular way. In some cases, even officer was kidnapped so that the report is not sent.

Now with the Insurance Act not allowing any claim rejection after three years of the policy term, even fraudulent claims or those where facts have been mis-stated would have to be passed. Insurers have sought five-year period beyond which claim rejections could be disallowed.

Often, these gangs tie-up with former insurance sector employees to understand how the process exactly works. In some cases of health insurance, even hospitals collaborate to bring out exaggerated bills for the insurance companies. Sometimes the claim amount for the mentioned ailment is seen to be higher than the usual amount due to which investigations are carried out by insurers.

There are several organized persons who take fake insurance either on the name of people who do not exist or on dead persons. Now since no claim can be rejected after three years insurers are expected to face major losses.

There are several cartels operating in this space that take up policies and make fraudulent claims. They are said to remove all evidence so that a claim is not rejected for fraud. Some of them even apply for a policy during the end of a quarter at the last hour so that the official in-charge simply accepts the proposal.

With law getting stringent on claim rejection, insurers are using analytics and also tougher underwriting to deal with this matter. For instance, credit information company Experian India has launched Hunter Fraud Management Services for the life insurance sector.

The offering will help life insurance companies to be a part of the Hunter Closed User Group (CUG) for detection of life insurance frauds.

This repository could help in reducing premium rates as insurers need not buffer for such losses, improving operational efficiency and bottom line of insurers and in keeping bad elements out of the system.

Data from life insurers show that there is at least a rise of 20% year-on-year in fraudulent claims, including claims in the name of non-existent people. With new system coming in place, these fraudsters would not be given insurance policies.