Fraudulent claims: Rs 45,000 crore loss each year to insurers

• Follow

Anurag Joshua (name changed) received an email from his insurer that a good amount of maturity amount on his insurance policy is due. The concerned person in the mail asks Joshua to deposit some TDS amount before the company transfers the maturity amount. Joshua does it only to discover that it was a hoax. Someone had created a fake email ID to dupe him. There are multiple cases when people produce fake death certificates to receive the life insurance amount.

“Insurance frauds are typically committed at the time of applications or claims, and cost a whopping Rs 45,000 crore every year to insurance companies. Nearly 70% of these frauds are committed via falsification of documents. According to industry estimates, insurers lose close to 10% of their overall premium collection to frauds,” a latest industry report on insurance noted.

Survey findings

According to the survey titled ‘Impact Of Covid – 19 Pandemic On Insurance Fraud Risk Mitigation And Investigation’, insurance frauds increased during Covid-19. At least one in four respondents from the insurance industry said insurance frauds increased during the pandemic. Moreover, the insurers had to take a cut in fraud investigation budget. At least 48% respondents said that Investigation Budgets Had Been reduced.

“There is 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,” the report said.

The report also highlighted that insurers are using digital mediums to detect frauds. At least 68% respondents said that their organisations were already using digital solutions for investigations, while 19% said they were in various stages of planning the transition to digital.

The survey 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 the post-pandemic times. Of these, 71% were specific that more emphasis would be on a digital approach.

AI help

“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,” said Deepak Godbole, Secretary General of Insurance Institute of India.

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

Notably, the survey was conducted prior to the onset of the second wave of Covid-19 and is reflective of operational realities pertaining to the time period, from March 2020 till February 2021.