6 Most Common Insurance Frauds in India You Should be Aware of in 2023

Updated on Nov 17, 2023

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 2023, 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.

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.

Top General Insurance Companies

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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