How Can Insurance Fraud Be Prevented?

  •  The problem with insurance companies in India is that they do not extensively share data as banks do. This is the reason why every insurance company has to rely on its own network to detect fraud. It is extremely important that all insurance companies form a common database and start sharing fraud data extensively. A start has been made as a repository has been formed in 2016. About 43 insurance companies have come together and have appointed credit rating agency Experian in order to use Experian’s big data and analytics capabilities.

    However, in order for Experian’s system to work, insurance companies have to regularly share data with Experian’s systems. To many insurance companies, this is unacceptable given the fact that it entails a lot of costs and also compromises the security of the data. However, it is likely that over time, data sharing becomes the norm and fraudulent policies are discovered more easily.

    At the present moment, most insurers only share a negative list i.e. a list of customer, distributors and medical professionals who have earlier committed fraud. Hence, the system is reactive and not predictive.

  • The insurance regulator in India has come down hard upon insurance companies which deny claims. New laws have been formed which state that an insurance company has three years to find out if the data furnished at the time of buying the policy was incorrect. After three years have passed, the data is assumed to be accurate, and insurance companies are forced to pay the claim.

    The problem is that the law punishes insurance companies but does not provide any recourse to them. If insurance companies prove that a person has actually tried to commit fraud, they get away with very light punishment. In order to stop the fraud in the insurance sector, it is important that strict laws are created as well as implemented. These laws will act as a deterrent to professional frauds that are making a career out of cheating insurance companies.

  • Lastly, insurance companies have started aggregating data on geographical areas where insurance fraud is rampant. This could be because of the law and order problem in the province, or it could be because of the high number of doctors who are willing to provide fake medical certificates in a given area. Insurance companies have started denying insurance coverage to people from certain neighborhoods. They have also started charging a premium if they do not outright deny issuing this policy. However, this is not sustainable. In the United States, lawsuits have been fought against this discriminatory practice called “redlining.” It is only a matter of time until legal action is taken in India as well.

Insurance fraud investigations shift to digital after covid onset, says survey

  • Insurers lose close to 10% of their overall premium collection to frauds, as per industry estimates

    NEW DELHI: India’s insurance industry has significantly digitised its fraud investigations in the wake of the covid-19 pandemic, a new survey of industry professionals has revealed. About 68% of survey respondents said their organisations were using digital solutions for investigations, while 19% said they were in various stages of planning the transition to digital.

    The findings are part of a report released on 23 July, titled Impact Of Covid - 19 Pandemic On Insurance Fraud Risk Mitigation And Investigation.

    The qualitative survey of professionals representing leading life, health, and general insurance companies in India was conducted by the Insurance Institute of India (III) with Lancers Network Limited as knowledge partner, in collaboration with Association of Private Detectives and Investigators India (APDI) and International Fraud Trading Group (IFTG).

    Nearly 60 industry executives representing various risk mitigation functions, including claims investigation, seeding, pre-issuance profile check, pay and recovery, health reimbursement and underwriting participated in the survey.

    Deepak Godbole, secretary-general, Insurance Institute of India said, “Insurance frauds in the form of inflated or false claims hurt not only the insurance companies but also their customers or insurance buyers, who have to pay higher premiums as a result. As this survey confirms, the growing adoption of technologies like artificial intelligence and data analytics are enabling better and faster insurance investigations, which augurs well for the whole industry."

    The survey also revealed that the industry’s shift to digital fraud investigations is permanent, with 92% of the respondents affirming that the increased use of technology in investigations would continue in post-pandemic times. Of these, 71% were specific that more emphasis will be on a digital approach.

    More than one in four (27%) of the respondents said insurance frauds rose during the pandemic. There was also an overall increase in insurance fraud investigations after the onset of covid-19, with 55% of respondents confirming that their professional activities related to fraud-fighting have either increased overall or increased under a specific area of operation during the pandemic. However, nearly half of the respondents also reported either a budget cut (32%) or zero budget allocation (16%) for investigations.

    Shivindra Pratap Singh, managing director, Lancer Network Limited said, “The pandemic has since last year provided fertile grounds for an increase in the incidence of insurance frauds while restraining insurance professionals from doing their jobs safely. While the pandemic lingers on, this is an ideal moment for the fraud & risk mitigation fraternity of the Indian Insurance Industry to utilize this disruption as a ‘Strategic Timeout’ and prepare for the future by developing their skills and embracing a more inclusive ‘new normal’."