Mumbai, October 13: India is a huge market for insurance but the industry is bleeding losses due to fraud. Insurance fraud leads to around Rs 40,000 crore every year and makes up for 8.5 per cent of the revenue that the industry generates.
And the huge losses have prompted the insurers to take steps. Many companies are starting up with separate departments just to access/ identify the risk and loss related to these frauds or scams.
“The detection of insurance fraud generally starts with identifying suspicious claims that have a higher possibility of being fraudulent,” says Anik Jain, CEO and co-founder of Symbo Insurance. “This can be done by statistical analysis, referrals from claims adjusters or insurance agents. Also, the public can provide tips to insurance companies, law enforcement and other organizations regarding suspected or admitted insurance fraud perpetrated by other individuals.”
Some of the most common methods implemented by insurers to tackle the menace are:
● Investigation and cross checks of documents to detect the fraud.
● Knowing the potential of fraud: can help minimise the loss
● Use of data analytics to detect fraud
● Running through special investigation of every doubtful claim
● Using detailed statistical analysis
● Allocating private investigators
One of the biggest brunts of insurance fraud is being face by the insured and prospective customers. Frauds lead to delay in claim settlements, in fact claims could also get rejected in certain cases.
It is very hard to specify the time frame required to investigate the fraud because it completely depends upon the type of fraud, people involved and relative potential of the fraud.
“On an average its takes around 15-45 days to investigate a normal potential case. Unfortunately, there are cases which take far longer than this due to complexity of investigation process,” said Jain.
Frauds also drive the cost of policies higher while also affecting the claim ratio for insurers.
Insurance Regulatory and Development Authority of India (IRDAI) few years back came up with the Insurance Fraud Monitoring Framework to help curb insurance frauds. Though it’s stil early days in the area of data sharing between the insurers, it’s certainly a step which will help companies to perpare better for spotting fraud.
“Anti-fraud policies at insurance companies have improved knowledge dissemination and hence help early detection of fraud cases. Internal resource training has also helped reduce frauds involving internal,” added Jain.
Talking about how claims gets affected in all this, Symbo Insurance’s Jain also revealed that around 10-13% of the claims in general insurance are fraudulent while life Insurance segment has mostly seen the frauds taking place where the sum assured is between Rs 2-12 lakhs.