The insurance sector seems to be the most vulnerable to frauds as companies are losing a whopping over Rs 15,000 crore (Rs 150 billion) every year due to exaggerated claims by customers or agents, a survey has found.
A latest survey conducted by the Indiaforensic Research, which is a Pune-based consultancy firm for fraud investigations, research and due-diligence, has revealed that insurance companies in India bear a loss of about Rs 15,171 crore due to different frauds every year.
Motor and health insurance are the most prone to insurance related frauds followed by life and property insurance, the report said.
Documents such as fake medical bills and certificates are commonly used to cheat insurance companies in the country. These are followed by driving license and FIR related papers, the report said.
"The survey states that unlike other industrial sectors, external parties like agents and claimants pose the biggest risk of frauds before the insurance sector," said Mayur Joshi founder member, Indiaforensic Research.
Frauds can also be committed through mis-appropriation (agent advisors depositing the premium cash money after a delay or not depositing the premium cash money at all),
customer non-existence (false policy sold to a non-existent customer) and through fraudulent claims (fake claims being submitted by customer's with or without agent connivance. The report said that one in every two persons exaggerates their insurance claims.
"There is a perception among customers that the insurance company always pays less than what you claim even if it is true damage assessment, which often motivates them to exaggerate their claims," it said.
Majority of the respondents believe that most of the frauds are caused by insurance agents who are the critical interface between customers and companies.
"Customers often approach them to seek advice when filing claims who in turn forge details and commit the fraud," Joshi said. The report was made on the basis of a case study and meetings with managerial personnel from insurance sector as well as large number of individuals from 23 out of 37 insurance companies working across the country, Joshi said.
The study reveals that 88 per cent of the respondents agree that insurance sector is prone to external risks of frauds and "every insurance company loses 8.57 per cent of its revenues to the frauds."
The insurance sector in India is growing with a consolidated turnover of nearly Rs 2,00,000 crore (Rs 2 trillion) every year.
According to the report, about 87.33 per cent of frauds were committed by individuals and the rest were done by syndicates.
"Use of fraud analysis software and stringent laws for punishing fraudsters and adequate awareness among them can help in keeping a check on insurance frauds," Joshi said.
The Central Bureau of Investigation had in June this year arrested a senior manager of a nationalised insurance company here for allegedly collecting money from customers but never deposited it.
