What is Insurance Frauds?
Insurance Fraud Definition:
Fraud in Insurance is an Act or omission intended to gain the dishonest or unlawful advantage for a party committing the fraud or for other related parties. Similarly in Abuse, people indulge in activities that are inconsistent with business ethics and medical practices which results in an unnecessary rise in claim costs. Unfortunately, there are many different types of Insurance frauds in India but let me today explain to you one of the most common subsectors of frauds in India- Health Insurance Frauds.
Fraud in insurance can take any form and can be committed in a variety of ways. It is wilful and deliberate, and done for illegal financial gain. It can be committed by any party involved in insurance related activities. Fraud is an increasingly serious matter as insurance business depends on trusts and keeping promises. The ultimate objective of the Insurance is to provide protection for all. Where fraud occurs, both Insurance Company and Policyholders bear the losses. Fraud goes against all the basic principles of insurance such as insurable interest, utmost good faith, proximate cause and indemnity. Therefore, Fraud will hit back at the customers with unaffordability of premiums and consequently affect their protection levels.
Let’s begin with the basic understanding of What is a Health Insurance Fraud?
What is Health insurance fraud
Health insurance fraud can be clarified as a circumstance where an insured or medical service provider furnishes fraud, false or misleading information to the insurer with the intention to achieve out of line profits from a policy for the policyholder or service providing source.
Abuse describes practices that, either directly or indirectly, results in raising the costs. It refers to practices not consistent with providing patients with services that are medically necessary, or that fail to keep the relevant professional standard, or where prices are charged unfairly. In Health Insurance, Abuse can be excessive diagnostic tests, extended and unnecessary stay in Hospital. Conversion of an outpatient or day care procedure into Hospital Admission, admission in Hospitals limited to diagnostic investigations.
Types of Frauds under Insurance Sector:
The Insurance Regulator IRDA has categorized health insurance frauds into the following types-
- Claim fraud: Fraud against the Insurance Companies in the purchase and/or execution of an insurance product, including fraud at the time of making a claim. In other words, this means that the customer is claiming for a health cover that he/she/they may not be entitled to as per the terms and conditions of their policy.
- Application Fraud: Here, the customer despite being aware of all factual information related to his pre-existing diseases, conditions, DOB, claims, etc enters the wrong information. In other words, policyholders do not disclose pre-existing conditions (such as diabetes) to save on premiums and get more coverage. There are also certain scenarios where we have come across many agents/insurers encouraging customers/policyholders to not disclose such diseases or enter false information to pay fewer premiums.
- Eligibility Fraud: This also denotes fraudulence by providing false information. For example, providing the wrong employment status of the employee in order to gain eligibility to a health policy with extra benefits. In other words, let’s say an employee who is only working part-time generates false records of his/her/their employment status to stand eligible for the company’s health cover.
- Medical Identity Theft: Here, a policyholder’s name is being wrongly used without the consent or knowledge of the person to access free medical services or treatments. In such scenarios, false insurance claims are submitted in order to gain free services. This leads to false information being added to the policyholder’s medical records.
- External and internal frauds: Simply put, external fraud refers to fraudulence made either by the customer, service provider or beneficiaries against the insurance company. Whereas internal fraud is made by agents or insurance companies against the customer.
Let me present you with more examples of the different types of health insurance frauds
Health Insurance Fraud Examples
- Treatment of uninsured persons, but billing for insured persons covered in the health policies.
- Billing for Doctor Fees for his unnecessary visits to the patients in the Hospital.
- Billing for services not rendered.
- Unwarranted procedures, excessive investigations, expensive medicines.
- The extended length of stay keeping in view the high sum insured in the policy.
- Documents submitted are of doubtful nature.
- Claims for disease or injury which seems to be pre-existing.
- Collecting treatment cost from the innocent patients with misrepresentation that all amounts will not be admissible in an insurance policy.
- Filing claims for treatments that are not medically necessary.
- Intermediary takes the premium but does not pass it to the Insurance Company.
- Intermediary inflates the premium and passes the correct premium to the insurance company and keeps the difference.
The remedies for Fraud across the insurance value chain include Compliance with the procedure of KYC, Pre-Medical check-ups, Timely Renewals and better services by the insurance industry. The IRDA has also issued guidelines that all insurance companies registered in India are required to have in place an Anti-Fraud Policy duly approved by their respective Boards.
Now that you know everything- in and out around health insurance frauds, let me now tell you the various ways in which you can prevent health insurance frauds.
How to Prevent Fraud in Health Insurance?
The following corrective measures to be taken to have control on Fraudulent Health Claims.
- Carefully read your health insurance policy’s terms and conditions
- Carefully fill in the application and enter all requested details honestly and correctly.
- Immediately get in touch with the insurance company if you suspect fraud.
- Ensure to thoroughly read all ‘add-on’ benefits that you are entitled to.
- Identification of Hospitals committing frauds.
- Identification of Intermediaries indulged in fraudulent activities.
- Compliance with the procedure of KYC for premium and settlement of claims.
- Beware of “free” offers
- Closely review all your medical bills
If you are facing any problem while buying health insurance for yourself or your family you can contact Insurance Samadhan, our insurance experts are always ready to help you.
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