Defeating Insurance Frauds: Top 10 Tips To Beat Insurance Fraud For Individuals & Businesses

What is insurance fraud? What are the different types of insurance fraud and scams? How can you protect yourself and your business from it? This article will answer these questions and provide you with 10 exclusive tips to stay safe for you and your business!

Insurance scams are on the rise right now. Many of us are not from a finance background; thus, breaking down the complexities of this kind of fraud is crucial for safeguarding you and your loved ones from being cheated.

What is Insurance Fraud?

First things first, you should know what exactly we mean by insurance fraud. Insurance fraud is any deceit perpetrated by a person or a group to receive an insurance claim to which they are not legally entitled. In simpler words, when someone deliberately provides false information or makes a false claim to obtain financial benefits from an insurance policy, or sells you an insurance policy that doesn’t exist, it is known as insurance fraud.

Types of Insurance Fraud

Now that we know what insurance fraud means, we move on to understanding the different types of insurance fraud that can occur. 

#1: Misleading Claims

The most common malpractice regarding insurance fraud is making inflated claims. Beneficiaries often inflate the accident to get greater reimbursement or claim from the insurance company. This can apply to various types of insurance like health, where people submit false medical bills. 

#2: Made-up Accidents

Some beneficiaries go one step further and spin up a whole new accident story to make a false claim. This is common with car insurance, where the policyholder himself intentionally collides with a stationary object or produces a rear-end collision. This is also done to get more reimbursement from the company.

#3: False Records

Submitting false information is something very common in the health sector. Policyholders make fake invoices, receipts, and records to inflate claims.

#4: Phony Policies

Some agents trick people into buying insurance that doesn’t really protect them. They take the money for premiums but don’t give the promised coverage. This is a big problem in life and health insurance and can especially target those with health issues.

Imagine an agent offering an old heart patient with a policy that gives him full coverage of medical expenses for a hefty premium. However, later it turns out that the agent was scamming him, and he did not receive the money at the time of need.

The scary part is that this can happen to anyone unaware of how scams happen and what should be done to avoid them.

#5: Identity Theft

Criminals steal identities to purchase insurance policies or file fake claims. Stolen identities are used to acquire medical treatment, buy insurance they’re ineligible for, or stage accidents. 

Rising Insurance Fraud

We have been talking about so much insurance fraud, but do you realize how real the problem is? How common and widespread is this malpractice? Maybe not. 

According to Deloitte India’s Insurance Fraud Survey of 2023, over 60% of insurers said that they have seen significant rise in insurance fraud and further 10% said that they have experienced marginal fraud.

The report further highlights the reason for this sudden increase in scams. The three major factors contributing to the rise of insurance fraud are:

• Increased digitization
• Remote working
• Weakened controls post-pandemic

With scammers becoming more tech-savvy and changing the modus operandi of insurers due to changes in lifestyle, working conditions, and the pandemic, the controls have weakened. This is allowing scammers and fraudsters to cheat more people in clever ways.

 The problem is very real and common. In today’s scenario, with advanced technology, anyone can be scammed—be it an individual or a business.

How To Prevent Fraud

—For Individuals

#1: Ask: Is the policy fake?

First things first, if the policy sounds too good to be true, you need to ask yourself: Is this policy fake? Here are a few tips to make sure that your policy is not fake:

• Buy the policy from licensed insurers only—If you are planning to buy it offline, make sure your agent has a license. If you buy an insurance policy online, ensure the website has trustworthy credentials. 
• The authenticity of the policy should be rechecked with QR code as mandated by IRDAI.
• Never sign a form without reading each and every detail.

#2: Careful with Premium Payment

Always pay a premium to a branch of an insurance company rather than an agent. Always demand a receipt of the premium payment and keep the receipt safe for future reference. Avoid paying your premium in cash. Always have an online transaction by cheque or by credit card.

#3: Do Not Share Information

Never ever share your personal information with a third party. Remember, genuine companies would never ask for original documents but photocopies. Do not share your passwords or OTP or details or policy with anyone.

#4: Fill It on Your Own

If your agent is filling out policy documentation for you, make sure you fill it out on your own. Read all necessary details, read the fine text, check spelling errors, and also check for factual errors. 

#5: Stay Cautious Online

Beware of fishy emails promising low insurance rates and websites with no credentials. These are made by hackers and scammers waiting to rob your credentials and money!

—For Businesses

#1: Organized Documentation 

Maintain a good practice of strict documentation of each and every policy, claim, and interaction with clients. These will help you later to avoid any scam due to negligence. 

#2: Get Verifications

Verify all people in the process, like screen vendors, contractors, and clients. Verify their past track record to avoid any scammers entering your network.

#3: Internal Audit

Get a systematized internal audit system that will highlight any red flags with respect to internal insurance processes.

#4: Seek Legal Advice

Seek legal advice for insurance policies to ensure your insurance practices align with the country’s legislative system.

#5: Fraud Awareness

Make sure your finance department and auditing team are well-educated and up to date with the latest insurance fraud practices. This will help them to locate red flags and be alert at all times for anomalies.

Takeaway

Insurance fraud is a common malpractice in the post-pandemic era. Many types of insurance fraud can take place. Today, anyone can be a victim of insurance fraud, but if you are well-aware, alert, and cautious while handling insurance schemes, you can surely avoid being scammed—this applies to both Individuals and businesses.

Resources 

• https://groww.in/blog/insurance-frauds-in-india 
• https://www.outlookindia.com/business/insurance-fraud-on-the-rise-says-deloitte-india-insurance-fraud-survey-2023-news-262930 
• https://www.paybima.com/blog/general-insurance/most-common-insurance-frauds-you-should-be-aware-of/#3 
• https://www.thehindu.com/business/60-private-insurers-see-rapid-rise-in-fraud-deloitte-survey/article66517659.ece 

For more information, kindly visit our official website – www.neodrafts.co