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The amount of insurance fraud estimated to be occurring in India’s $70 billion dollar a year insurance market is approaching 10 percent and rising rapidly. The most common of reported frauds include collusion between insurance company employees and private clients, insider trading, document manipulation, and falsification of cause of death claims to receive benefits. While these numbers are not far out of line with similar numbers being reported from countries around the world, what is staggering is the piece of the fraud pie being attributed to one single type of fraud in India. Life insurance accounts for nearly 85 percent. Of the $6 billion+ that was specifically defined, the vast majority traces straight to life policies. Even more startling is that life insurance fraud has more than doubled in the past five years, compared to a 70 percent increase measured in “all other lines.”
It’s important to recognize some of the contributing factors.
1. India’s delivery system relies heavily on third party product handling and distribution. An extra layer of handling = an additional risk of compromise.
2. The schemes are becoming more sophisticated as access to new technology becomes available. Not only does law enforcement have access; so do the criminals. Reports indicate that the dishonesty often occurred throughout a policyholder’s life — policy buyers figured out that premiums were significantly lower for younger people, so birth certificates and other proofs provided when the policy was initially quoted/written were frequently modified to make the client younger than s/he was. Not stopping on the front end, frauds continue on the far end; death certificates have also often been manipulated so that coverage would apply. E.g., backdating the date of death so an expired policy was still in force.
3. False, misleading, or half-truth medical information provided on the application.
4. A healthy brother taking the required medical examination for his unhealthy brother.
5. Cases involving manipulation of the necessary doctor credentials and medical bill forgery by external parties who handle the billing.
Life insurance fraud is certainly not the only cause of alarm in India. Of concern, too, is the growing incidence of automobile insurance fraud. With the world economy so precarious, consumers are willing to do almost anything to control premium costs on the front end (dishonesty in the application stage) and to, if given the opportunity, capitalize on claims dollars when an accident occurs. Insurance fraud, no matter what country, evolves on a predictable timeline. The US defined that timeline, first world countries followed in the wake, and now third world countries are bringing up the rear. India is 20- 25 years behind — in comparison to the US — but regulators are quickly realizing the magnitude of the problem and the fact that carriers must spend investigative money to protect general company coffers.