6 Most Common Insurance Frauds in India You Should be Aware of in 2024

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5 min read

Updated on Nov 22, 2024

Insurance fraud in India is a huge cause that keeps people away from buying and enjoying coverage offered by insurance policies. Let us take a look at the major causes of insurance fraud to be aware of in 2024, in this post.

Insurance fraud is nothing but a scam involving insurance policies, mostly done online where people or groups of people dupe others of money in the name of insurance. This is done by distorting information about insurance plans or at the time of making claims to have monetary gain. There are many forms of insurance frauds taking place in the form of fraud application, fraud insured, fraudulent identity, fake claims and fake insurance companies and so on.

Such fraudulent activities affect everyone including the policyholder, the insurer, the genuine people who pay premiums to gain insurance benefits and so on.

Among the common types of insurance fraud activities that are involved in an insurance scam include;

  • In case of accident, overstating the severity of the situation by the policyholder for vehicle claims or bodily injuries
  • Fabricating facts during accidents
  • Making duplicate claims for the same accident/issue
  • Offering false details in a claim form
  • Staging of an accident so that claim could be filed to gain money etc.

All these and much more frauds are present that a genuine policy seeker should be aware of and stay safe from.

6 Different types of insurance fraud in India

1. Making fake claims

This may include things like providing false exaggerated claims, fabricating false healthcare records, filing several claims for one incident and so on. Also, it can be a case of applicants offering wrong information about their age and occupation or about their health condition and so on.

2. Provider fraud

Provider frauds are those where providers file for bills to the insurer for certain services which were not at all included in the treatment. Or they may bill for certain services at double the rate.

3. Application fraud

Under an application fraud, the insured offers false information on the application form while purchasing the policy so that they can get the plan at lower premium or to get enhanced coverage.

4. Fraud by Policyholder

Under such cases, the policyholder intentionally misrepresents certain facts and information regarding the lifestyle, job or health of the policyholder so as to receive lower premium rates.

5. Theft of Identity

This type of fraud occurs when someone uses another person’s identity in order to obtain insurance coverage or to receive enhanced benefits from the insurance company.

6. Claimant fraud

In this fraud, the applicant or the policyholder submits a claim for something that never happened such as an injury, accident etc.

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What Happens When Insurance Fraud Takes Place?

When insurance fraud detection takes place, it can have some serious consequences for the ones doing the crime as well as the victim.  If an individual is found guilty of a fraud, he/she is tried under prosecution for criminals. The person may be levied with large fines and jail depending on the gravity of the crime.

Further, insurers may levy added penalties like suspending one’s benefits under the policy. They may also take civil action against people who commit fraud.

It is crucial that people should know about the fraud schemes so as to stay protected against them and save them from being a victim. Also, if you suspect that you have been a victim of insurance fraud, it is important to contact the police immediately.

Additionally, you may report about any suspicious activity that you notice to your insurer so that appropriate action could be taken.

How to Avoid Insurance Fraud?

Both the parties including insurance firms as well as policyholders can be a target of insurance fraud. Here are some ways that you as a customer can understand and implement to avoid such fraud.  

  • Inspect in detail about the legitimacy of the insurer – The selection of the insurance provider is the most crucial aspect of buying an insurance policy. This ensures the integrity of the policy. Hence one is expected to review every detail of each aspect of the insurance provider including their license and registration, their CSR, coverage, and more. Also, don’t get allured by the incentives and rewards of unknown companies. 
  • Never make cash payments of your policy premiums – Always remember not to pay the premium of your policy in cash. Prefer other modes like cheque or online payment modes.  Even if you have to pay in cash due to any reason, you must pay it at the branch of the company rather than paying it to an agent. Make sure to ask for receipts of the payment. 
  • Avoid sharing important documents – If you are dealing with an agent or a third party for insurance purchase or premium, don’t give away original copies of your important documents like insurance copy, Aadhar, passport, PAN, etc. Don’t sign a blank cheque ever or share OTPs, and account credentials. 
  • Understand the policy nitty-gritty well – Read the policy document carefully and ask the insurer if you are unsure about any clause or terms. Verify the information on policy coverage in detail. Try to buy policies from the insurance company not agents. 
  • Ensure to fill out the form on your own for offline buying – Fill out the form of insurance on your own if you want to avoid fraud, especially when buying offline. You can take the help of the insurer or agent to fill out the form.  Read through the inclusions and exclusions and also make sure not to make any spelling or other mistakes. 
  • Buy a policy online – Buying a policy online is a safe option to avoid the risk of insurance fraud by agents or intermediaries. This will ensure secure transactions. Follow the instructions carefully while making online payments.

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To Conclude

As discussed, insurance fraud is a crime that is punishable and the people involved in such crimes may get severe penalties. So, it is better to stay safe from such things. Moreover, it is also important to know and be aware of the various kinds of frauds that are going on iesn the insurance sector so that you can stay away from being a target to such fraudulent practices.

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FAQs on Common insurance frauds you should be aware of

Who commits most insurance frauds?

Insurance frauds are mostly committed by organized criminals. They steal huge amounts of money from insurance companies and common people in the name of insurance through fraud activities. Even the general public commits insurance frauds to cover their deductibles.
Some commit insurance fraud as they see filing claims as an opportunity to make easy money.

What are examples of false insurance claims?

Here are some examples of insurance fraud:

Exaggerating damages
Application fraud
Eligibility fraud
Staged accidents
Claims fraud

What is the basic concept of risk in banking and insurance?

When an investor invests in a policy or some kind of investment option, the individual steps into an uncertain situation to gain from it. That uncertainty is known as risk. There are different types of risks which originate from varied situations. 

What was the biggest insurance fraud in India ?

There have been many top insurance frauds in India over the years. Some of these cases were reported in many case studies on insurance frauds in India.

Mar 06, 2023
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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