Increase in frauds indirectly drives up the premiums collected from policyholders as insurers ultimately recover the losses by increasing the prices
The Indian insurance sector incurs a loss of more than 8% of its total revenue collection in a fiscal year, according to the Ernst & Young survey on frauds in insurance. Further, the study indicates that the average ticket size of a single fraud ranges between Rs. 25,000 and Rs. 75,000. Increase in frauds indirectly drives up the premiums collected from policyholders as insurers ultimately recover the losses by increasing the prices.
According to a survey by Star Health Insurance Pvt Ltd, the health insurance industry in India loses approximately 15% amounting to Rs. 6 billion to Rs. 8 billion per annum on account of fraudulent claims. Fraudulent and dishonest claims are a major hazard not only for the insurance industry but also for the entire nation’s economy. Concrete proof as evidence including documentation, statements made by the customer and his family members and even neighbours are taken into consideration.
To reduce fraudulent claims, the IRDA has mandated sharing of claims data and even blacklisting ‘tainted’ hospitals with a history of submitting inflated bills. Health insurers need to set up a detailed anti-fraud department to develop and implement a detailed program to combat frauds. Some insurers have put in place additional checks such as visiting the hospital during the insured’s stay or even his house to examine the case papers to prevent fraudulent claims. Insurers need to adopt a definite methodology to address and reduce risk of frauds within it.