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