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Insurance Frauds

Written by: Richa Rane

Team: Drishti Chulani (Research)     Sandowen Ramasawmy (Research)

India is one of the biggest markets for Insurance companies across the world. However, it should be understood that operating an insurance business in India is not free from risks. This is because insurance companies in India face an abnormally large number of fraud cases. In fact, it is estimated that the Indian insurance industry loses close to ₹4200 Crores to insurance fraud in India. This works out to about 8.5% of all the premiums collected every year.

The Hotbeds for fraudsters are: Sabarkantha, Modasa, Kheda and Mehsana in Gujarat; Jalgaon, Dhule and Nandurbar in Maharashtra; Ganjam in Odisha, and Morena in Madhya Pradesh. Around 10-13% of the claims in General insurance are fraudulent while Life insurance segment has mostly seen frauds taking place where the sum assured is between ₹2-12 Lakhs. Fake death certificates from doctors lead to frauds which are estimated to have cost over an average of ₹10000 Crores to the industry.

Frauds Sectors

Various kinds of Insurance Frauds:

  1. Burning down the house for profit.
  2. Fake slip and falls gain traction.
  3. Fake insurance, fraudulent repairs.
  4. Life insurers anticipate phony deaths.

Few recent frauds

  • A multi-million insurance fraud that preyed on disease and poverty. Between 2017 and 2019, hundreds of villagers in Haryana officially died in road accidents, while they were actually dying of cancer. The Police said that 3 identified as Padam Kharab, Naresh Kumar and Joni Saroha, carried the dead bodies and allegedly influenced doctors, insurance agents and enquiry officers.
  • Indian-Origin Doctor in Las Vegas Jailed for Health Insurance Fraud. An Indian-origin doctor has been imprisoned for 71 months in a federal prison and is ordered to repay over $2.2 million for health insurance fraud by the Federal Bureau.
  • 10 Arrested in Madhya Pradesh For Insurance Fraud Worth Crores. Ten members of a gang, including a lawyer and a doctor, have been arrested in Madhya Pradesh’s Dhar district for allegedly defrauding insurance companies of crores of rupees by forging fake documents of terminally ill patients and people in moribund state.
  • 6 Indians charged for $225 million healthcare fraud. At least six Indian-origins among over 100 doctors, nurses and healthcare professionals arrested on charges of alleged involvement in a massive Medicare fraud estimated at $225 million, in one of the biggest crackdowns on healthcare fraud-related crimes in the US.

Steps Taken By Insurance Companies To Avoid Frauds:

Some of the most common methods implemented by insurers to tackle the frauds are:

  • Investigation and cross checks of documents to detect the frauds.
  • Knowing the potential of fraud: can help minimize the loss.
  • Use of data analytics to detect fraud.
  • Running through special investigation of every doubtful claim.
  • Using detailed statistical analysis.
  • Allocating private investigators

The new technologies offer improved avenues for gathering and analyzing both the usual structured data and unstructured text data. Machine learning algorithms are able to process data and ascertain patterns in behaviour that far exceed human analytic capabilities, clearly resulting in significantly deeper levels of accuracy in fraud detection. Carriers that use analytics can maximize fraud detection and optimization with reduced efforts.

Types of data Analytics Used

  • Text Analytics
  • Predictive Analytics
  • Behavioral Analytics
  • Pattern, Graph and Link Analysis
Seriousness Of Insurance
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About the author

Dhruv Gupta is a faculty assistant member (Probability and Statistics) for B.Sc. (Actuarial Science and Quantitative Finance). Holding a great aptitude for quantitative reasoning, he enjoys the process of learning and teaching statistics.

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