A recent interaction with a prospective customer set alarm bells ringing for a private life insurer. Since physical KYC documents could not be collected amidst the coronavirus lockdown, scanned details were sought. Though the individual ‘claimed’ that the policy was for his father, no details of the Aadhaar number submitted could be traced.
When contacted, this prospective tried to mislead the insurer by saying that the Aadhaar card was newly made, so data was not getting reflected. The underwriting team then sought a video call with the father, in response to which the individual said that the father was bed-ridden and could not 'be disturbed'.
This policy proposal was then put on hold. A cursory check with a fellow insurer revealed that this individual had tried the same trick with several other insurers.
With the COVID-19 pandemic preventing agents from visiting customers to sell policies, fraudsters seem to be taking full advantage of the lockdown by trying to buy policies in name of non-existent customers or deceased relatives.
The private company, in the above case, was saved since insurers are allowed to access details of the Aadhaar number of individuals by partnering with the UIDAI. This is usually done to minimise KYC documentation and for cases where the insurer suspects any misrepresentation of facts.
Industry sources told Moneycontrol that former agents as well as doctors collude with fraudsters to buy policies, only to make claim a few years later. The fact that policy issuance has moved online is only furthering the cause of these criminals. On an average, industry estimates say that 'suspect' policy proposals have risen by 30 percent ever since the nationwide lockdown came into effect from March 25.
Agents may also be partly to blame. With tough economic conditions due to the lockdown leading to 30 percent average drop in premium collections, they are also finding it tough to meet sales target. A few agents also admit that during the month-end period, they tend to ignore gaps in the proposal form submitted online since there is a rush to complete targets.
Insurance laws also have made it tough to reject claims. As per Section 45 of the Insurance Laws (Amendment) Act 2015, no policy claim can be questioned if premium has been paid for three consecutive years. So even if there is a proven case of fraud, insurers would be forced to settle the death claim.
On an average, insurers lose about Rs 300 crore every year due to fraudulent claim payments. The highest cases of fraud are seen in life insurance death claims followed by health insurance and personal accident claims.
In health insurance, fake doctor bills are presented to get reimbursement claims while in personal accident cases, forged doctor certificates citing 'accident' as cause of death is given. For accident claims, insurers have also dealt with cases where relatives dying of natural cases were crushed by a car to show accidental injuries or bodies smuggled from mortuaries to seek death compensation.
Ever since March 2020, insurers said that there has been a rise in cases where there are inaccuracies noticed in proposal form data and allied documents. The common ones include the policyholder not present during the confirmation video call, discrepancies in medical information provided or mismatch in photograph provided with person appearing on the call.
After buying a term policy worth Rs 5 lakh in April 2020, a Goa-based shop-owner’s family filed a death claim in May citing his death in a road accident. Further investigation by the insurance company brought forth the fact that this individual had in fact, died in an accident three years ago and that the death record was forged. A police complaint was filed by the insurer after rejecting the claim, but the family could not be traced.
This is not just true of life insurance companies. A similar trend of trying to buying products for ‘ghost’ policyholders has also been noticed in health insurance.
When a general insurer received a health insurance proposal for a 50-year old salaried professional, the underwriting team sought a clear bill of health from a hospital. This individual presented a complete medical test certificate of February 2020 from a reputed Kolkata hospital which termed him as ‘fully fit’.
During the video underwriting process, the insurer could not ascertain the body type of the person since the quality of the feed was poor. Usually video calls are used to check the height, weight and related anomalies (obesity or very low body weight) in a proposed policyholder.
To doubly check the medical data, the hospital executives were called. Turns out, this individual never did any medical test at this medical institution, leave alone being given a ‘fit’ certificate.
When confronted, this individual disconnected the call and immediately switched off his mobile phone.
Digital underwriting has been initiated to benefit policyholders who are unable to step out of their homes. Unfortunately, this is being used by unscrupulous elements looking to make a quick buck.
The consequence of this would be that the time taken to issue policies online would take longer. A pin-code based approach to blacklist certain regions where fraud cases are higher is already being undertaken by the insurance industry. Taking a step ahead, insurers are also now looking to conduct detailed video interviews with the proposed in whose name the policy is being taken.
There will also be a thorough background verification of the individuals including their monthly income details from the Form 16 on the basis of which the term insurance cover size is determined. Further, medical history documents would also be re-verified with the service providers to ensure veracity of the data.
Due to a few black sheep, the entire policyholder community may stand to suffer.
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