Prepared by Jaswanth Singh G

INSURANCE
FRAUDS
Insurance fraud
• Insurance fraud is a deliberate deception perpetrated against or by an
insurance company or agent for the purpose of financial gain. Fraud may be
committed at different points in the transaction by applicants, policyholders,
third-party claimants, or professionals who provide services to claimants.
Insurance agents and company employees may also commit insurance fraud.
Common frauds include “padding,” or inflating claims; misrepresenting facts
on an insurance application; submitting claims for injuries or damage that
never occurred; and staging accidents.
People who commit insurance fraud include:

• organized criminals who steal large sums through fraudulent business

activities,
• professionals and technicians who inflate service costs or charge for services
not rendered, and
• ordinary people who want to cover their deductible or view filing a claim as
an opportunity to make a little money.
• Some lines of insurance are more vulnerable to fraud than others. Healthcare,
workers compensation, and auto insurance are generally considered to be the
sectors most affected.
Categories of Perpetrators of FRAUD in Health
Insurance
 Consumer
 Sales Distribution Channel
 Providers
 TPAs
 Insurers
Govt. mass policies- anew dimension of

frauds
Investigators!!!
Cost of insurance fraud – World Snapshot

• The FBI estimates that the total cost of insurance fraud (excluding health insurance)
is more than $40 billion per year. Insurance fraud costs the average U.S. family
between $400 and $700 per year.
• In the late 1980s, the Insurance Information Institute interviewed[1] claims
adjusters and concluded that fraud accounted for about 10 percent of the
property/casualty insurance industry’s incurred losses and loss adjustment expenses
each year. Using this measure, over the five-year period from 2013 to 2017,
property/casualty fraud amounted to about $30 billion each year. The figure can
fluctuate based on line of business, economic conditions and other factors.
• The Coalition Against Insurance Fraud (CAIF) estimates that workers’
compensation insurance fraud alone costs insurers and employers $6 billion a year.
Public attitudes toward fraud

• Public attitudes have sometimes hampered insurers in their fight against

fraud. Studies suggest that some portion of insurance fraud committed by
consumers is driven by revenge or retaliation for a personal service exchange
which they think is unfair. People may retaliate in order to “get a return” or
“get their money’s worth.”
Types Of Fraud In The Insurance
Industry

• False Claims

One of the most common types of insurance fraud is making a claim for an accident that never
happened or was staged or work that was never performed. There are a number of ways this occurs
and for a number of reasons. Slip and fall claims are probably the most common type of staged
accident because injuries are hard to prove or disprove and potential payouts can be high. In some
cases, policyholders are in on the fraud and in other cases, they are innocent victims. When an
automobile owner owns their car outright, they will sometimes damage their own car and make an
accident claim. Then, when they get a payout from the insurance company, they will either have the
car repaired inexpensively or just not get it fixed. Homeowners will also sometimes make claims for
supposed accidents or self-created property damage. Another type of false claim is for damage that
was not an accident, such as arson. In some cases, a building may be worth much less than what it is
insured for. The owner may hire someone to set fire to the building - or set it on fire themselves - in
order to make an insurance claim. Other common causes of this type of fraud are homeowners who
are upside down on their mortgages or business owners who are facing bankruptcy.
• Inflated Claims

Inflated claims can happen at any time, but they tend to be the most plentiful in
the wake of natural disasters. Whenever there is a natural disaster large enough to
affect an entire region, the area almost invariably becomes flooded with scam
artists and hucksters trying to make a buck off the insurance companies. In some
cases, homeowners may knowingly sign inflated claims for work that was never
done and in others cases, they don't actually know that the work the insurance
company is being billed for was never performed. Some types of standard home
maintenance are also ripe for inflated claims, such as roof repairs. In some cases,
the inflation doesn't come from work that was not performed but rather the
insurance company is billed for high-quality materials that are switched for sub-
par materials when the work is performed.
• Disaster Fraud

In the wake of any natural disaster, chaos generally ensues. This creates a perfect
environment for a wide range of fraudulent activities. Because of the high volume of
claims being made, insurance companies simply do not have the personnel available to go
out and investigate every claim. It is not unusual for a single home to be left completely
untouched right in the midst of a ring of homes that are burned, flooded or otherwise
destroyed or a car or other valuable to survive in pristine condition. Insurance companies
generally rely on data to determine which homes are eligible for coverage and which are
not. When a home or other property remains intact in an area of major damage,
policyholders can submit claims which are often paid sight unseen. Hurricane Katrina, for
instance, caused roughly $100 billion in damages, yet more than $34.4 billion in insurance
payouts were made in addition to $80 billion in government funding. It is estimated that
roughly $6 billion in government funds actually went towards insurance fraud.
• Faked Death

Faking your own death is such a common type of fraud that it is even a
common plot point in a wide range of books, movies, and television shows.
The premise is fairly simple. A policyholder will take out a large life
insurance policy on themselves and then fake their own death. When the
beneficiary (or beneficiaries) receive the insurance payout, they simply ride
off into the sunset with their supposedly deceased loved one. Or, as is
probably far more common, they simply double-cross the supposedly
deceased loved one and vanish into the sunset by themselves - with their
generous insurance payout.
• Insurance Company Fraud

Not all insurance fraud is committed by policyholders or by defrauding policyholders. A great deal of
insurance fraud is also committed by insurance agents or agencies. Some of the more common types
of insurance agency fraud include premium diversion and fee churning. Premium diversion is
actually the most common type of insurance fraud and it occurs when insurance agents or agencies
simply pocket a policyholder's premium rather than sending it along to the underwriters. In some
cases, unlicensed insurance agents will simply sell insurance, pocket the premiums and then refuse to
pay any claims. This is particularly prevalent with worker's compensation insurance because of the
high dollar amounts associated with that type of group insurance. Fee churning generally occurs
when an insurance agent continually changes a life insurance policy to different insurance companies
in order to receive a commission. Insurance agents are charged with choosing the best policy for the
client, but instead, they will often move the policy around to get a commission for themselves from
different companies. When this happens, the policyholder's premiums often go up because life
insurance gets more expensive as you age and in many cases, their coverage also goes down.
India’s insurance industry hit by frauds; insurers
pay higher premium to compensate
• Insurance companies lose over USD 6.25 billion to frauds which results in
higher premiums for genuine consumers.
• The Indian insurance industry is expected to touch US$280 billion by 2020
owing to economic growth, increasing awareness and stronger distribution
channels. In terms of gross premiums generated by a country, India ranks
10th for Life Insurance and 15th for Non-Life insurance products.
Fraud Scenarios
• A few scenarios of Insurance frauds brought to the notice of companies, regulators and whistleblowers:
• Producing forged documents
• Non-disclosure of critical information
• Buying of policies in the name of a dead person or a person with a terminal illness
• Stating false reasons for claims
• Misappropriating assets
• Inflating expenses
• Manipulating pre-policy health check-up records
• Staged accidents and fake disability claims
Key Statistics – Insurance Fraud 
• India’s insurance premium in 2018 for Life Insurance was US$73.74 billion
and Non-Life Insurance was US$26.10 billion totalling US$99.84 billion
• In FY2017-18 claims repudiated were 0.74, claims rejected were 0.43 of Life
Insurance claims 
• According to a report, Insurance companies lose over US$6.25 billion to
frauds which results in higher premiums for genuine consumers. 
• A media report stated that over 10% of claims in general insurance are
fraudulent 
IRDAI Fraud Policy 
• According to the Insurance Regulatory and Development Authority
(IRDA), every insurance company is required to set up a Fraud
Monitoring Framework. The framework shall include measures to
protect, prevent, detect and mitigate the risk of fraud from
policyholders/claimants, intermediaries and employees of the
insurance companies.
Anti- Fraud Policies 
• Insurers are expected to adopt a holistic approach to adequately identify, measure, control and monitor fraud risk and
accordingly lay down appropriate risk management policies and procedures.  The Insurance company Board of Directors
are mandated by the IRDA to review their respective Anti-Fraud Policies on an annual basis, and at such other intervals as
it may be considered necessary. Such policies need to provide a comprehensive guideline on fraud monitoring procedures,
identification of potential avenues of fraud, guidelines to cooperate and coordinate with State and Claw enforcement
agencies for identifying the act of fraud as well as the perpetrators.
• These policies also guide in building a framework that will allow them to exchange information with other insurance
companies with regard to sharing intelligence on the occurrence of incidents and scenarios of such frauds so that these
can be red-flagged within the insurance ecosystem. 
Fraud Monitoring Function
• Every Insurance company is mandated to have the Fraud Monitoring Function as a separate vertical that shall ensure
effective implementation of the anti-fraud policies. They shall be responsible for laying down procedures for internal
reporting from/and to various departments, to educate employees, intermediaries and policyholders on identification and
prevention of frauds. Further, they must regularly update regulatory authorities on such incidents as well as steps taken to
contain such scenarios within a stipulated time. Lastly, they must furnish periodic reports to their respective Boards for
review and course correction.
• Insurers are liable to inform both potential and existing clients about their anti-fraud policies. Insurers include necessary
cautions in the insurance contracts and relevant documents, duly highlighting the consequences of submitting a false
statement and/or incomplete statement, for the benefit of the policyholder, claimants and their beneficiaries.
According to a FICCI report common
triggers observed to detect frauds are:
• Claim from a policy with only one member at minimum sum insured amount. 
• Multiple claims with repeated hospitalisation and multiple claims towards the end of the policy period, close
proximity of claims. 
• Any claims made immediately after a policy sum insured enhancement. 
• Claims from a member with the history of frequent change of insurer or gap in the previous insurance policy.
• Policy claims with evidence of significant over/under insurance as compared to the insured’s income/lifestyle. 
• Claims from a non-traceable person or where courier/cheque have been returned from insured’s documented
address 
• The second claim in the same year for an acute medical illness/surgical minor illness/orthopedic minor illness
in the same policy period for main claim. Young males between 25-35 years getting admitted for acute medical
illness 
• Claims from members with no claim free years, i.e. regular claim history
• [Link]
Real Life Instances of Insurance Fraud
• Cattle Insurance
• Disability Insurance (Tumkur District Forum)
• Cheques Favoring in Misleading Names
• Insurer/Bank Employee Systematic Fraud Plan
• Hospitals Over Stay
• Tumkur/UP/Bihar TP Claims
• Multiple Nominee Claims
• Nominee Frauds
 PATENT PUBLICATION –
(PROPOSAL STAGE)
PROJECT TITLE : A UNIQUE MODEL FOR DETECTION OF
HEALTH INSURANCE FRAUD WHILE IMPROVING UX USING
UI BASED ON EMOTION CUE
Name of Inventors :
1)Mr. JASWANTH SINGH G (Insurance Domain Consultant (InsureTech) and Faculty for Insurance, Financial Services and Pension Studies)
2)Dr. ILANGO VELCHAMY (Head-Centre of Excellence for Intelligent Human Computer Interaction, Department of MCA, CMR Institute of Technology)
3)Dr. V R UMA ( Associate Professor Department of Commerce CHRIST (Deemed To Be University)

Brief :
 The patent primarily envisages creation of awareness among the users about the various product offerings
of the companies and to detect frauds.
 It shall include 6 levels such as inclusion of ICT, Customer Experience, Customer journey, Emotion
experience, constructing a methodology, optimization and personalization.
 ICT media will be used to construct a better user interface.
 Artificial Intelligence and Machine learning techniques will be the primary tools to construct the user
interface as it will be help to achieve both the objectives, to create awareness and detect fraud.
BIMA (RI) Kya He ?
• Insurance Frauds Control Act; an urgent need in India
[Link]
n-urgent-need-in-india-fraudulent-claims-indian-penal-code/story/[Link]
l

• A multi-million insurance fraud that preyed on disease,

poverty, desperation
• [Link]
erminally-ill/[Link]
Few Cases
• If you are from Maharashtra’s Nandurbar or Gujarat’s Mehsana districts, there are fair chances of insurance companies either rejecting your application for a
cover under some pretext or the other, or you may end up paying a premium that is higher than the national average.

Insurers have identified at least 80 districts across the country which have excelled in fraudulent claims over the past decade. They have identified rings that
operate with the efficiency of a corporation with well-trained men and women who collect data with the efficiency of a 21st century start-up.

• A combination of poor due diligence in writing policies by insurance companies and the organisational efficiencies of criminals in identifying those who are
on deathbed and in enlisting doctors to produce fake certificates led to frauds which are estimated to have cost over Rs 10,000 crore annually to the industry.

• Organised fraudsters identify people who are terminally ill and buy insurance on their behalf and share the booty with the family members. There is a nexus
between fraudsters, doctors, lawyers and village-level administrators.

• Bajaj Allianz General Insurance recently stumbled upon a ring when it started probing a customer of suspected fraud. The company got suspicious when
Nilesh Kumar from Mira Road applied for a claim of Rs 55,000 for treating fever.

Since it was over-the-top, Bajaj Allianz smelt something was amiss and employed 100 of its staff to investigate, which included former policemen, doctors
and lawyers. Kumar admitted to have filed such claims with at least 11 other insurers aggregating Rs 10 lakh

What it found was the organisation behind it with reams of letterheads, rubber stamps, and other stationary items of various hospitals along with 7 PAN cards
with different names and 11 credit cards at his office in Bhayander

HDFC Ergo, a joint venture between HDFC and German insurer Ergo, bust a nexus and got 13 persons arrested by Delhi police in the capital, Meerut and
Noida. A bunch of criminals had set up a call centre and started selling policies on behalf of HDFC Ergo and pocketed the premium.
Delhi: Insurance racket dupes senior citizen of
Rs 6 crore, busted September 10, 2020
• Delhi Police's Economic Offences WIng busted an insurance fraud racket for duping a senior citizen of Rs 6 crore. Eight
people involved in the racket have been arrested, including a minor.
• The juvenile, part of a gang of cheats, posed as major and opened a bank account with RBL Bank in the name of M/s
FUTURE INDIA with a fake name. This bank account was used for getting money transferred from gullible victims,
including the 86-year-old complainant, who was made to believe that they were receiving phone calls from insurance
company officials. The money, so credited, was withdrawn from ATMs, leaving no money trail to follow.
• The victim Satish Roy Kapur's daughter reported the matter to the police saying that her father was maintaining five bank
accounts some of which were joint accounts with her siblings. After large amount of money was transferred from the account
to an unknown account, the siblings confronted their father who said that certain individuals who claim to be officials of an
insurance company are helping him to retrieve his money another insurance company.
• A case under relevant sections was registered in August 2019. During investigation, eight members of the gang were arrested
and a charge sheet has already been filed against them.
• The detailed investigation revealed that Rs 2,35,000 was transferred on February 5, 2019 to the bank account of M/s
FUTURE INDIA having office at A-66, Sector-65, Noida, UP. As per the bank records, the juvenile was proprietor of firm
under a fake name.
• During investigation, gang members were found to be running call centres which did promotional calls for insurance
companies. In this manner, the criminals got access to the data of the complainant. The juvenile’s bank account was utilised
for getting the money transferred from the victims.
Case 1
Claim Amount:Rs.25144
Case Details: Manipulation in main hospital bill to increase the claim amount
Claim amount:Rs.110480
Case details:Hospital bill amount was [Link] bill
obtained from the hospital
Thank You

Jaswanth Singh G
Insurance (InsureTech), Banking & Pensions Domain
Consultant and Faculty
Innovator @ [Link] and 
[Link]
+91 8310765785 +91 9449049107 
jaswanth@[Link]