Worried about Corona virus spreading in India? Buy Health Insurance and get coverage now. View Plans
Health Insurance Frauds in India and How to Avoid Them?
Take informed decisions with IIFL Insurance:

Health Insurance Frauds in India – Not Good for Policyholders

India is among the biggest markets for insurance companies. However, it must be recognized that India’s insurance industry isn’t without dangers, as even Indian insurance companies are subject to an extremely high percentage of insurance fraud. It is believed by experts that the Indian insurance industry is losing around USD 6 billion because of the frauds.

The health insurance industry in India is expanding at a rapid rate, and with it, the volume of fraudulent claims is also increasing. Around 45,000 frauds in the insurance industry were committed within India during the year 2019. Insurance companies typically lose between 10 to 15 percent of business due to this scenario. The amount of fraudulent health insurance claims may be as high as up to 35 percent, which makes health insurance frauds one of the top 10 frauds in India.

According to a survey, one in ten claims received is fraudulent that require an examination. Insurance Frauds in India or Medical Scams in India are claims made by providing incorrect information to an insurance company to obtain the health benefits a fraudulent person wants. 

Insurance Frauds in India

The fraudsters are getting more inventive. The latest methods for defrauding insurance companies are being used nearly every single day. One of the most popular methods to trick an insurance company is to purchase an insurance policy in the name of a terminally ill patient. Doctors who examine patients for pre-existing ailments are given bribes or threatened to forge reports. For example, if a person is diagnosed with cancer, doctors write an assessment approving the need for insurance claim payout for that particular individual. Then, when the patient passes away due to cancer, the insurance claim amount is paid to the fraudster. With low awareness of technology in rural India, such types of health insurance frauds are easily orchestrated in those areas to get health insurance coverage for patients.

Insurance Scams in India

5 Types of Health Insurance Scams in India You Should Know About

Let us now look at the various examples of health insurance frauds in India:

  1. Claims Fraud: This type of fraud is where the insured has raised a claim for a health benefit to which he isn’t entitled as per the policy’s terms and conditions. In these situations, both the insured and service provider are seen as working together. In the same way, policyholders can buy different insurance policies from different insurers and file claims from everyone.
  2. Application Fraud: Here, the insured person, who is fully aware of the situation, enters incorrect information about his existing diseases, date of birth, claim history, etc. For example, a policyholder enters a wrong birth date or doesn’t declare any existing disease to pay a lower premium or get more coverage. Sometimes, even employers offering health insurance to their employees provide incorrect dates of joining of their employees to reduce the premium.
  3. Ineligibility Fraud: It is a case of giving incorrect information to an insurance company about the employee’s birth date, employment status, medical conditions, pre-existing diseases, nominee, etc. For example, an employee who is not in full-time roles of the business and is working only part-time can still be insured under the company’s health insurance plan through the creation of false records within the HR department.
  4. Internal and External Frauds: External fraud refers to a false claim which is either made by the beneficiary, policyholder, or service provider to the insurer. Internal fraud is perpetrated by employees of the firm in tandem with the policyholder.
  5. Opportunity and Deliberation Fraud: Deliberate fraud is made by deliberately presenting the insurance firm with a person as having an injury, illness, or disease covered under the policy. In contrast, a policyholder tries to create an opportunity for fraud by giving false information about a pre-existing condition and pushes aggressively on a genuine claim.


How to Avoid Insurance Frauds in India?

Due to various frauds that have occurred, the insurance sector in India suffers enormous losses. In addition, the fraud perpetrated by the policyholder or employees of the company is considered criminal and impacts the company and other legitimate policyholders. Following are some tips to avoid insurance frauds in India:

  • It is essential to recognize fraud while registering a claim and in turn cancel the policy and even put the concerned person in jail.
  • Therefore, make sure you provide details that are correct to the insurer.
  • Also, decide to purchase the policy directly with the insurance company to ensure you’re buying from a reputable source. 
  • Additionally, purchasing a policy online can fetch you discounts, as no third-party is involved, you will have the policy in your mailbox, which you can access at any time.


How Insurance Companies Are Dealing Against Fraud 

In any industry, the possibility of fraud creates weaknesses in the current operating system. This is why it has good reason to conduct an immediate evaluation of the entire system along with the concerned partners. Some of the common ways by which insurance companies attempt to prevent fraud include:

  • The strictest guidelines and standards are put in place for prescribing medications for serious diseases.
  • An active ‘extortion unit’ is formed which participates in inspections to verify the validity of cases.
  • More efficient and transparent systems are being developed to cut down the unnecessary time delay between the policyholder and insurance firm.
  • One of the major repercussions of any false representation of protection is the cost that a client from a different company would have to pay. In light of the concept of pooling changes within the industry, the rise in the number of frauds that are reported could cause an increase in the costs of administration. In addition, a thorough examination of such events could also lead to the delay of settlements. So, a middle ground is being explored by the industry to minimize any fraud in the future.


The Conclusion

Insurance companies are doing all they can to stop the negative effects of extortion. However, any improvement in technological advancement could only aid in further improving the fight against technical and digital frauds in the insurance industry. With proper safety checks, insurers can bring confidence to the minds of policyholders about the entire insurance sector, rather than them losing trust due to large-scale insurance frauds.

Buy Insurance - 18002101330