The word insurance is a synonym for trust. It’s a relationship of faith between multiple stakeholders onto each other and only with that faith does the whole industry operate.
It all starts with a customer having trust in the agent and the insurance company that at the time of loss when he will be needing the most, the insurer will come to his rescue and reinstate all his financial losses.
Similarly, the agents trust the insurer as they are the face of the company and thus, with the faith of providing impeccable service they sell insurance policies with confidence of indemnity to their clients.
Lastly, the insurance company operates the business by trusting the whole bunch of stakeholders. They trust in the client that all the material information is being disclosed at the time of Underwriting the risk and that at the time of claim, the client will be honest and will claim only for genuine losses instead of inflating bills and asking for more.
They trust the agents that policies will not be mis-sold, and all the terms and conditions will be conveyed to the clients before selling the policy.
They trust the surveyors, the loss assessors, the investigators, the hospitals, the garages and so on and so forth. Although, with technological advancements, trust is being backed by proof in order to eliminate frauds in the sector, it is still the backbone of the insurance industry.
Types of Insurance Frauds and Methods to control them
Inflation of Expenses: The most common and difficult to curb fraud in the insurance industry is when the clients or vendors inflate the bills more than the actual expenses in order to claim higher amounts to earn money. This is difficult to capture at times and insurers often shell out a lot of money in all kinds of claims due to inflated bills.
- Methods to Control:
- In the case of health insurance, most insurers prefer that maximum hospitals should be brought on the PPN list thereby making CASHLESS payment approvals on pre-fixed tariff rates saving money and providing better services.
- Inflation in Marine and Fire insurance inflation is tricky to deal with and only with the expertise of great surveyors, prices of items can be marginalized, cross verified and brought to reasonable levels.
- Tie ups with motor garages are done to curb such inflated repair bills. The company also ensures that the original part purchase bills are submitted.
Fictitious Claims: Another major issue that the insurers across the world face are the fake claims made by insureds in all LOBs. Be it health, fire, marine, motor, PA etc,, with an intention to earn money, a lot of people create fake claims and documents. Catching a hold and filtering our such claims are difficult at times as the people filing these claims are very skilled and cautious. Thus, they keep all kinds of documents and evidence in order.
- Methods to Control:
- Technology has a vital role to play in controlling fake claims. Tech like CCTV cameras, mobile phones, location histories, call records, data records etc are important to identify genuine vs fake claims.
- Strong measures to be taken by the insurer. It has often been seen that the insurers, even after identifying a fraud, do not file an FIR or get into legal proceedings against the culprit. Setting examples by putting the felons behind bars is important in order to create fear in the minds of people.
- In case of fake health claims, the role of TPAs and investigators is very very pivotal. They deal with loads and loads of claims, which provides them with ample data to create intelligence to catch the fake claims.
Purchasing policy post a loss and filing claim: There are times when people either do not have an insurance policy or there is a break in the policy when the loss occurs. Now, to get this claim, people buy policies and then file a claim afterwards. This is majorly done in motor claims and in order to curb these, strong underwriting with no tolerance pre-inspection should be done.
People need to understand that these fraud fake claims are very harmful for the insurance industry as the industry is based on trust. Below are the harms of fraud claims:
- Increase in premiums: As the incurred claims ratio increases due to higher fraud claims, the insurer has no option but to increase premium prices which affects the common man.
- More checks: In order to catch the frauds, the insurer will put in more and more checks which can delay both U/W and claims processing. This affects the customers and creates a bad user experience.
- Genuine claims rejections: This is a known fact that along with fraud claims, a lot of genuine claims are also rejected as the line is very thin, but this causes distrust from the common public towards insurers.
Thus, both insurer and customers should raise their voice against fraudulent claims and take strong steps in order to curb them.
By- Chirag Nihalani
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