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Frauds are increasingly becoming a menace and are hindering the growth of the insurance industry. A rise in frauds has a severe impact on the relationship of trust and harmony between the Insured and insurers. Fraudsters deploy novel techniques to either cheat the insurance company or the insured. In some cases, it is the customer trying to take undue benefit from the insurance company, while in other cases it is the intermediary breaking the trust of both the insured and the insurance company. There are varieties of frauds that we have been witnessing and we shall discuss a few in context of life insurance.
In the life insurance industry, most of the frauds that happen are at the stage of claim. One of the most common things happening is fabricating documents to file a fraudulent claim. People fabricate documents like Pan Card, death certificates, medical records to file a Claim against their policy.
Those people looking to file a fraudulent claim usually adopt this practice. They get a policy issued in name of a non-existent person or somebody who has already died, and once the policy is issued, they look forward to seeking a claim on the policy.
Getting a Policy Issued for Person with Fatal Ailments
By deliberately suppressing facts, people manage to obtain the insurance policy for people who suffer from either terminal illness or any life threatening illness or disabilities.
In some cases, people manage to buy life insurance which is way disproportionate to their current financial income by fabricating their bank statements, IT Return documents and Salary proof.
In many cases, it has been found that the intermediary or agent abuses the trust that the customer places on him. In one of the incidences, it was found that the agent was misusing the cheques issued by a customer to him. Though the customer intended the cheque payment for Premium on existing life policy, it was misused by the agent to pay for a fresh insurance policy. In times of recession, when it becomes increasingly difficult for agents to reach their targets, such fraudulent practices gain strength.
According to a study by India Forensic Center, the insurance company loses about INR 30,000 crores annually because of fraudulent claims. You would obviously be thinking so how does this impact a customer? Well, it does have a bearing on the customer.
While an insurance company calculates its premium for policies, they take into account their past claim experience. Such fraudulent acts only inflate the total claim value, which lead to heightened premiums for the genuine customer. Apart from this tangible loss, the intangible harm being that the customer has to face a more rigorous claims procedure and in the process, a relationship that needs to be harmonious gets estranged.
Insurance companies as well have become notably proactive in curbing such frauds. Hence, they are trying to make their claim settlement processes more robust.