Insurance Fraud: The Rise Of False Claims And Fake Deaths

Health Insurance has become an indispensable part of our lives. There are several types of insurance like Life Insurance, General Insurance, Group Health Insurance, Term Life Insurance, among others. But if there’s one thing these cannot protect you from, it’s insurance scams!

No matter what type of insurance you own, you have to beware of fraudsters trying to disrupt standard processes.

Problematic Pandemic

If Covid-19 came with taglines, a winning one could be: “Life insurance scams, made easy”. The Coronavirus pandemic officially killed 5.3 lakh Indians, while death claims shot up across the life insurance industry. A certain insurer told NDTV that their death claims reports doubled in 2021 alone, and the sheer scale of the global virus created another opening for scammers.

State governments were flooded with claims after the Supreme Court ordered them to pay Rs 50,000/- to each bereaved family. Many claims proved to be fake. However, many concerns surrounded small-time doctors issuing falsified death certificates in exchange for bribes.

What is insurance fraud?

Insurance fraud refers to activities committed by, against and in some way towards insurance companies. Scams may be committed in various branches of the insurance industry – from health insurance to corporate insurance or motor insurance.

Insurance crimes are committed by people from all walks of life and have become an alarming concern.

When does an insurance fraud take place?

Insurance scams occur when a claimant (anyone making an insurance claim) attempts to procure a benefit or advantage they are NOT legally entitled to. Insurance fraud also includes cases where an insurer, like an insurance company or insurance broker, attempts to knowingly deny a claimant their deserving benefits.

Four key aspects of insurance fraud:

1. Insurance fraud is deliberate
2. Insurance fraud results in some kind of financial gain
3. Insurance fraud is committed under untrue or false pretences
4. Insurance fraud involves illegal activity, according to Indian Law

Insurance scams can be broadly classified into two categories:

1. Hard Fraud: Hard fraud occurs when an individual deliberately plans or creates a financial loss. For instance, seeking benefits on the life insurance policy of a living person based on a fake death certificate. Hard frauds also include theft or arson against an asset covered by insurance, like an office premise or related to portable electronic devices that may be insured.
2. Soft Fraud: Soft frauds are more opportunistic in nature and consist of policyholders exaggerating legitimate claims.

Types of Insurance Fraud

According to the Insurance Regulatory and Development Authority of India (IRDAI), there are three distinct categories of fraud:

1. The Policyholder, Customer or Claims Fraud: This kind of scam is most common and usually performed against an insurance company during an insurance product’s purchase or during the execution of the said purchase. This includes frauds initiated at the time of making insurance claims. For example, while purchasing health insurance, it is important never to falsify a pre-policy report using fake medical certificates or keep any pre-existing diseases a secret from the insurance agent or insurer.
2. Intermediary Fraud: Perpetrated by insurance agents, corporate agents, third party administrators and intermediaries against the insurance company, policyholders, or both.
3. Internal Fraud: When fraud is committed against an insurance company by its Director, Manager, and/or other staff members or officers, it is considered internal fraud.

Policyholders generally commit the most common insurance frauds:

• Hiding a pre-existing condition: Falsifying a report of a pre-policy health check-up to conceal any diseases or medical facts.
• Fabricated documents to meet terms and conditions of the insurance policy: Concealing age, previous health report or status of chronic diseases by faking disability.
• Duplicate bills of exchange: Submission of forged or inflated bills, especially when no expenses have been incurred.
• Participating in fraud rings: Colluding with doctors, insurance agents or lawyers to alter information to make profits from a claim.
• Orchestrated accident: Staging an accident to claim compensation for medical and hospital expenses.

Gangs of Dhar and Barpeta‍

Let’s look at a widely reported case of a classic document forgery insurance scam in India.

For 5 years, a Madhya Pradesh-based doctor and a lawyer forged fake documents of terminally ill people. The duo would obtain motor insurance claims and life insurance claims in the names of the victims. After their natural death, they forged certificates proving unnatural causes for their death.

Even the age of these senior citizens was falsified to avoid suspicion from insurance companies.

Experts suggest that scams come in varying flavours, depending on the time of the incident and the demographic in the region. But mainly because the appeal of a quick payout is too hard to resist.

Just as the greater Delhi area became notorious for job scams and Jharkhand emerged as the hub for phishing calls, Assam took to life insurance frauds between 2017 and 2019. In District Barpeta, in North East India, very few residents have birth certificates, and other basic documents are easy to forge locally. Men told insurers that their living wives were dead, while women said their dead husbands had only died recently. Brothers and sisters cooked up more siblings who then “fake died” and took “fake birth” whenever needed. In some cases, insurance fraud was perpetrated by people who had no connection to the “dead” at all. Other ecosystems were being formed as part of a “fraudulent ring”. Many bribed community banks to add their names to a cash aid program meant for farmers. In this case, the scam was fuelled by crushing poverty, government neglect, political oppression and a struggle to access health care and quality education, making the youth rich targets for steering easy-money cons.

The future of insurance scams looks bleak

In 2022, insurance claims are microscopically analysed using technology. Today, the documents are analysed by specific and well-equipped APIs or other forms of automation, where fraud can be detected easily. As much as a document can be forged, it is never as good as the original, and this difference — which is negligible to the human eye — can easily be caught by technology.

Be mindful! How to ensure that you don’t accidentally commit insurance fraud?

• To avoid paying higher premiums, do not fabricate documents to meet any terms and conditions associated with your health insurance or life insurance policy.
• Never submit forged or inflated bills.
• Do not change the dates on any investigation reports or bills
• Be accurate with dates, details and amounts while submitting applications for claims
• Inform insurers if you hold other policies. You cannot submit similar claims to multiple insurance companies in an attempt to gain maximum reimbursement or as a way to earn some profit.
• Refrain from participating in community lawsuits or group-related claims where you may be forming a coalition against an insurance company. Be wary of some members who may be making false claims.
• Never fake an accident to make money. Seeking compensation for false medical expenses is illegal and considered serious fraudulent behaviour.

Hope this quick read on staying alert and being on the right side of the law was informative. For corporate sessions on insurance and financial wellness, reach out to us via the ‘Get in touch’ button on the top right of this page. Our insurance experts can help you and your team with answers to all your concerns and queries.