Insurance Fraud Research covered widely

Indian insurance companies have borne a loss of over Rs 30,000 crore in 2011 due to different kinds of frauds, a study has claimed.

It cited collusion between the employees of insurers and private persons, document falsification and manipulation in citing cause of death to claim insurance benefits, as some of the reasons behind these frauds.

“The losses caused to the insurance sector are Rs 30,401 crore which is roughly 9 per cent of the total estimated size of insurance industry in the year 2011,” the report said.

This report created by Indiaforensic Center of Studies was widely covered in most of the National News papers and Electronic Media. Here are the links for the various news articles

<span >To access the complete research on the Insurance sector frauds in India please click here

India loses $6.25 Billion to Insurance Frauds – an Indiaforensic Research

Indiaforensic has come up with an exclusive research focusing the Insurance Sector in India. This research has brought forward the quantum of losses in Insurance Sector, thus disclosing some really shocking facts. This report was mentored by Mayur Joshi – an Anti-Fraud Professional having more than 15 years of experience.

According to this Indiaforensic Research, the Insurance Sector in India loses 30401 Crore of rupees every year due to frauds! In other words every insurance company loses 8.5% of its revenues to the frauds.

Three are two basic parts of Insurance sector, one is Life Insurance and the other is General Insurance, Life insurance sector contributes maximum to the frauds i.e. 86% which is more than 6 times of General Insurance which contributes 14%.

70% of the total frauds committed in the general insurance sector are of the nature of falsification of the documents. Medical Bills / Certificates top the list with 31% followed by Driving License (16%) and FIR (13%) which is actually a government document Fraudsters do not even fear forging it.

Motor Insurance is the biggest and most lucrative sector in General Insurance business followed by Health Insurance sector. Motor insurance has a stake of Rs.1554 Crore in the year 2011 almost 70% of increase in two year if compared to Rs.915 Crore in 2009. After motor the number comes of Health with total contribution of more than Rs.800 Crores and so on…

In Life Insurance Sector, the equation is quite different, there are mainly four types of Schemes of frauds, Miss-selling of Insurance Policy, which means Selling the Term Plan instead of ULIP and vice versa. This scheme costs 36% of the total frauds in Life Insurance Sector followed by the Fake Documentation Scheme with 33%.

This report is now a part of Certification in Insurance frauds offered by Indiaforensic.

Insurance Fraud Research 2009

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.

 

Insurance research Gets wide media attention !

The Insurance research of Indiaforensic received nation-wide attention from media. Many newspapers covered the research with various headings.

We are making the copy of this research available for the readers free of cost till 20.08.2009. For any querries related to the research you can contact us at info@indiaforensic.com or write an email to the research mentor Mr. Pradeep Akkunoor at pradeep dot akkunoor at gmail dot com

We welcome the comments on this research

Some of the media mentions can be read out here

  1. Hindu Business Line
  2. Business standard
  3. Deccan Herald
  4. Sakal – Marathi News paper
  5. Sify
  6. Rediff

How the Insurance frauds research was conducted

Pradeep Akkunoor – Research scholar based in Thailand is one of the pioneers in the Insurance frauds.

Insurance fraud is typically characterized as the external or third party fraud. Unlike other frauds where the employees commit the frauds by virtue of their occupation, Insurance companies face the risk of frauds from the external and third party frauds. It becomes difficult to understand the psychology of the external fraudsters.

Additionally there are no patterns in the transactions as their could be some red-flags in the credit card usage. Hence Insurance frauds are highly complicated to investigate. This is domain which requires attention of other industries.

Research on Insurance frauds
Fraud is a phenomenon that affects every industry, however, given the nature of the insurance business, the fraud risk is even more pronounced in this sector. A philosopher had once said, you do not know what you can not measure or quantify. In this context, it is Indiaforensic’s humble effort to quantify the magnitude of the fraud that affects this industry and take on the problem head on by identifying appropriate solutions. I would take this opportunity to thank all the Insurance companies and the managers who took part in this survey which enabled us to come up with this research report. The consensus is eye-opening – the insurance industry is losing close to 15000 Crores rupees every year! That is almost 9% of revenues of an insurance company. This clearly indicates the seriousness of the problem. With the publication of this report, we hope to achieve greater awareness among consumers which can eventually lead to reduction of insurance frauds.

Respondents
Pradeep launched the research to understand the perceptions of the

1. Claims managers [80% of the respondents were claims managers]
2. Employees working other divisions in the Insurance Industry [ 20% of respondents were from various other divisions ]

Methodology
These findings are very interesting and the research is available for download on request.
Methodology followed by Indiaforensic in the research is as follows

* Decided on the research concept
* Study of issues
* Preparation of questionnaires
* Collecting responses through personal interviews and email surveys
* Data Analysis of the survey responses
* Report Creation
* Expert Review and Comments
* Publishing and Awareness Drive

This is a very interesting research and needs to be followed by those who are in the Special Investigation Units of the various insurance companies.

Quantification of losses
One of the most significant achievements of this research is quantification of the absolute approximate losses in Indian Rupees to the Insurance Industry in the year 2009. The figure is bound to change but this report will act as the benchmark.