BY : SHANNELL LEWIS HARISH SHETTY

FRAUDS IN INSURANCE SECTOR

INTRODUCTION

Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum.

The origin of life insurance in India can be traced back to 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent.

The specific legal definition varies by legal jurisdiction.

MEANING OF FRAUD

INSURANCE FRAUD HAS BECOME A LUCRATIVE BUSINESS FOR CRIMINALS WHO FIND IT VERY EASY TO “PLANT” EVIDENCE AND DEMAND INSURANCE COVER FOR ANY DAMAGES OR LOSS THAT IS INTERNATIONALLY CARRIED OUT.

INSURANCE FRAUDS ARE FOUND IN AREAS LIKE HEALTHCARE, AUTOMOBILE, LIFE, FIRE INSURANCE.

BACKGROUND

INSURANCE FRAUD

Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer.

Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise.

Insurance Fraud Fraudulent billings

represented nearly 30% of the insurance industry cases. These cases were nearly twice as common as the next-most-frequently reported scheme, which was check tampering.

Conversely, nearly 70% of the organizations in the insurance industry conducted fraud training for their employees and managers — a higher rate than for any other industry

Of the 78 cases, 74% were prosecuted.

CAUSES

The “chief motive in all insurance crimes is financial profit.”

Insurance contracts provide both the insured and the insurer with opportunities for exploitation.

This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits.

INTERNAL FRAUD

EXTERNAL FRAUD

CATEGORIES OF INSURANCE FRAUD

INTERNAL FRAUD OFTEN INCLUDES THE CREATION OF A FICTIOUS COMPANY TO GENERATE INSURANCE PREMIUMS AND ISSUE FRAUDULENT POLICIES .

THIS IS USUALLY PERFORMED BY PROFESSIONAL CON-ARTISTS, BUT THERE ARE SOME RED FLAG TO PROTECT CONSUMERS FROM BEING THE VICTIM OF LIFE INSURANCE FRAUD.

INTERNAL FRAUD

FOR INSURANCE COMPANIES THERE ARE SETS OF INDICATORS THAT AROUSE SUSPICION THAT A CONSUMER OR BENEFICIARY IS TRYING TO DECEIVE THE COMPANY.

IF FRAUD IS PROVEN THE CLAIM WILL BE DENIED AND THE CRIME WILL BE REPORTED TO THE AUTHORITIES.

FOR EXAMPLE IN CALIFORNIA INSURANCE FRAUD IS PUNISHABLE BY UP TO FIVE YEARS IMPRISON AND A $50,000 FINE.

EXTERNAL FRAUD

HEALTH CARE INSURANCE

AUTOMOBILE INSURANCE

PROPERTY INSURANCE

TYPE OF INSURANCE FRAUD

ACCORDING TO ROGER FELDMAN, BLUE CROSS PROFESSOR OF HEALTH INSURANCE AT THE UNIVERSITY OF MINNESOTA, ONE OF THE MAIN REASONS THAT MEDICAL FRAUD IS SUCH A PREVALENT PRACTICE IS THAT NEARLY ALL OF THE PARTIES INVOLVED FIND IT FAVOURABLE IN SOME WAY.

HEALTH CARE INSURANCE

THE INSURANCE RESEARCH COUNCIL ESTIMATED THAT IN 1996. 21 TO 36 PERCENT OF AUTO-INSURANCE CLAIMS CONTAINED ELEMENTS OF SUSPECTED FRAUD.

THERE IS A WIDE VARIETY OF SCHEMES USED TO DEFRAUD AUTOMOBILE INSURANCE PROVIDERS.

THESE PLAYS CAN DIFFER GREATLY IN COMPLEXITY AND SEVERITY.

AUTOMOBILE INSURANCE

FRAUDULENT ACTIVITIES AGAINST PROPERTY INSURANCE PROVIDERS CONSIST OF THE DESTRUCTION OF PROPERTY IN ORDER TO RECEIVE INSURANCE PAYEMENTS FOR IT.

PROPERTY INSURANCE FRAUD CAN ALSO OCCUR WHEN CLAIMANTS EXAGGERATE THE VALUE OF THE PROPERTY LOST OR DAMAGED.

PROPERTY INSURANCE

OLDER CITIZENS

POLITE AND TRUSTING

NOT REPORTING A FRAUD

REASONS WHY FRAUDSTERS TARGET SENIORS:

FRAUD-BUSTING UNITS

EDUCATE CONSUMERS

TRAIN EMPLOYEES

TRACK DOWN CHEATERS

PREVENTING FRAUDS

AVOID SIGNING BLANK INSURANCE CLAIM FORMS.

INSURER’S BENEFITS STATEMENT CAREFULLY

ASK YOUR HEALTH CARE PROVIDER WHAT THEY CHARGE FOR A VISIT, TREATMENT.

WHAT YOU WILL NEED TO PAY OUT OF YOUR POCKET.

NOTE OF ALL OF YOUR HEALTH CARE AND MEDICAL APPOINTMENTS.

HOW TO AVOID HEALTHINSURANCE FRAUD

An insurer obtained a new corporate client. The brokerage deliberately understated the risk on the policies and as a result the insurer grossly under priced the policies. The risk the broker exposed the insurer to exceeded £100k.

It was later discovered that the broker had done this with 20 large corporate clients placing the policies with numerous insurers.

Investigators were alerted and investigations revealed that the incentive behind the under stating of these large corporate policies was to build a portfolio of seemingly valuable business. They then sold that business to an unsuspecting reputable broker firm.

Investigations identified that the entire portfolio of business was fraudulent. False signatures were also identified on a number of policies.

The fraud created victims of 20 corporate health insurance policy holders, numerous insurers and the unsuspecting broker.

Civil legal action is pending and the matter is currently being investigated by police.

BROKER FRAUD (CASE STUDY)