will have to identify areas of business and the specific departments in the organisation that are potentially prone to fraud and lay down a detailed department-wise anti-fraud procedures. These procedures should also lay down the framework for prevention and identification of frauds and mitigation measures. Also, insurers will have to lay down procedures to coordinate with law enforcement agencies for reporting frauds on timely and expeditious basis and follow-up processes.
The regulator says insurers will have to inform both potential and existing clients about their anti-fraud policies. The insurers will include necessary caution in the insurance contracts/relevant documents, duly highlighting the consequences of submitting a false statement for the benefit of the policyholders, claimants and beneficiaries.
The insurers will have to pursue with the CBI the final disposal of pending fraud cases, especially where the insurers have completed the staff-side action. Similarly, insurers will have to vigorously follow up with the police or courts on final disposal of fraud cases.
A Ficci sub-group on health insurance fraud has highlighted the concern that insurance fraud is not defined under the Indian Insurance Act. Even other instruments with the Indian legal system, such as the Indian Penal Code (IPC) or the Indian Contract Act, do not offer specific laws. “Sections of the IPC, which deal with issues of fraudulent act, forgery and cheating, are sometimes applied, but none of them are specifically targeted at insurance fraud and are inadequate for acting as an effective deterrent,” says the Ficci working paper on health insurance fraud.
Fraud and dishonest claims are not only a major hazard for the insurance industry, but also for the country's economy. According to an E&Y survey on frauds in insurance, the Indian insurance sector incurs a loss of more than 8% of its total revenue collection in a fiscal year and the average ticket size of a single fraud ranges between R25,000 and R75,000. Analysts say insurers will have to be proactive in putting in place anti-fraud policies and ensure that the quantum of fraud is reduced.