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A STUDY OF FRAUD INVESTIGATION IN FRAUDULENT INSURANCE
CLAIM
Mayur Abhyankar
Sinhgad Institute of Management and Computer Application, Pune
Original Research Paper
Forensic Science
INTRODUCTION
Fraud can be defined as an intentional misrepresentation of fact which
may cause other people to tolerate losses, mostly a monetary loss. In
most cases act of lying is considered as fraud but legally it is just a
small element of fraud. Insurance fraud is any action done with the
purpose to gain a fraudulent output from an insurance process. Mostly
insurance fraud includes complicated financial transactions which are
mainly conducted by white collar criminals, and also sometimes by a
person having specialized knowledge and criminal intent.
Insurance fraud can be divided as 'soft' or 'hard' fraud. Soft fraud occurs
when the honest people made legitimate claims or may list down the
fewer number of employees or may misrepresent the work. Hard Fraud
occurs when someone intentionally invents claims or fakes any kind of
accident.
The basic reason for all insurance fraud is to make a financial profit.
Mostly who does such crime taken it as a low-risk task as compared to
other classes of crime which also reduces the risk of extended
punishment? Because of the lack of investigators in the insurance
industry, the number of fraudulent cases is detected is much smaller
than the number of acts are actually committed.
Types of Insurance Fraud may include
1. Life Insurance: - It involves faking death to make a financial profit.
2. Health Care Insurance: - It is a process of misrepresentation of
informat ion rel ated to health car e benefi ts which in clude
providing fake medical bills, billing for a higher level of services,
alteration in claims submission. Most commonly physicians are
involved in it.
3. Automobile Fraud: - This is a most common type of insurance
fraud which includes fake traffic death or fake collision or may
include exaggerated claims for insurance money. Automobile
fraud can be ranging from care damage, staged collision, stolen
cars, exaggerated claims, car accident etc.
4. Unnecessary medical procedure: - This type of fraud is done by a
medical practitioner. If you go to the doctor for hair related
problems, the doctor will suggest an order of blood test which has
nothing to do with the hair problem, then that can be a form of
insurance frauds.
5. Fake death: - Here a person may insure himself or his spouse and
after several months he fakes his own death and spouse is paid for
his death benefit.
Insurance fraud can occur at any stage of insurance transaction done by
the individual applying for insurance, third party claimant, or by
policyholders. Fraudulent activities damage the lives of innocent
people both directly and indirectly as these frauds increase the cost of
the premium.
DATA INTERPRETATION:
Around 9% of revenue losses by insurance companies due to
fraudulent insurance claims every year.
TABLE 1 – INSURANCE FRAUD IN 2016
Out of these total insurance fraud 86% are life insurance fraud and 14%
are general insurance fraud.
TABLE 2 – COMPARISON OF FRAUD IN LIFE AND NON-
LIFE INSURANCE
Source: - India fore nsic p rem ier organiza tio n i n f orensic
accounting education (2012) Annual Anti-fraud conference.
For detection of these fraudulent insurance claims investigator has to
depend upon the variety of evidence which may include inquest report,
post-mortem report, medical and other bills, the statement given by the
witnesses, determining the authentic ity of ID-proof and other
documents etc. He has to follow the trail of documents to reach a
conclusion about the authenticity of the claim.
CASE STUDY
Policy holder supp lies mislea din g i nform ati on and frau dulent
documents in the course of making a valid claim: - Mr. X has come to
one of the insurance offices for an insurance policy where he has shown
interest in one of the insurance plans. When officials had gone to his
home for completion of documents, they came to know that he may not
capable of paying such huge insurance amount after seeing his
standard of living by keeping in mind that he came directly
approaching to insurance office by his own. After investigating the
case by an investigator of insurance company they came to know that
he had taken same insurance policy from other insurance company and
after a year he makes a claim under medication for his organ
transplantation. After getting the claim the policy is been cancelled by
the insurance company. For a current insurance policy, he has
mentioned that he is not suffering from any kind of disease. Later
investigator thought he can do the same for this policy also as he has
provided misleading information related to health issues the company
doesn't provide any kind of insurance to him.
Note- The names and places in the above mentioned case has been
changed due to legal circumstances.
INDIAN JOURNAL OF APPLIED RESEARCH
1
Volume-9 | Issue-3 | March-2019 | 86 18ISSN - 2249-555X | IF : 5.397 | IC Value : .
KEYWORDS : Insurance Fraud, Risk management, Risk assessment, Fraudulent claims.
Insurance Fraud is scariest threat to most of the insurance companies. These companies are facing increasing fraudulent
cases of insurance from past few years. These fraudulent cases increase the cost of premium which causes enormous
problems to both policy holder and also to insurance companies. Such insurance fraud cases involve unauthorized and unlawful act. Risk
management plays a crucial role in insurance industry to counteract these illegal activities. Thus, insurance companies are advised to use these risk
managements plan for prevention of insurance fraud. The present study on insurance fraud can be used to analyze risk assessment and fraud
pattern also prevention techniques used by organization. The reason of this study is to examine variety of insurance fraud and threat associated
with it and formulation of risk management plans to reduce the insurance fraud to smallest possible degree.
ABSTRACT
Ketan Patil*
Shri Vaishnav Vidyapeeth Vishwavidyalaya, Indore *Corresponding Author
Total Revenue – Premium
Insurance Fraud
INR Billion
US Billion
INR Billion
US Billion
3500
70
304
6.16
Insurance Fraud
Percentage
INR Billion
Types of Life
Insurance Fraud
86%
261
1
Misselling
36%
94
2
Fake document
33%
86
3
Others
31%
81
General Insurance
14%
43
1
Falsification of
documents
70%
30
2
Other fraud
30%
13
CONCLUSIONS
ŸInsurance companies need to invest more in providing training and
education to the fraud investigators so that fraud cases can be
restricted.
ŸIncreasing Insurance fraud cases doesn't only increase the cost of
insurance companies but also lead to increased premium. Thus
insura nce compani es must have prop er risk manage ment
framework to minimize the number of fraud.
ŸInsurance fraud taken as a low-risk task thus done by white-collar
criminals on a regular basis. So changes need to be made in laws by
providing rigorous punishment to them.
ŸThis study pointed out that insurance fraud can be restricted by
formulating proper risk management framework and increment in
existing rules and regulations.
REFERENCES:
[1] Anonymous in India forensic- Premier Organization in forensic accounting education,
(2012), “6th Annual Anti-Fraud Conference”, viewed 13 January 2012.
[2] Clarke, M., 1990. The Control of Insurance Fraud: A comparative view, The British
journal of criminology.
[3] Dionne, G., 1984, The Effects of Insurance on the possibilities of fraud, Geneva Papers
on Risk & Insurance.
[4] Dr. Kutty S., 2014. Insurance institute of India, Grievance Redressal Mechanism.
2
INDIAN JOURNAL OF APPLIED RESEARCH
Volume-9 | Issue-3 | March-2019 | 86 18ISSN - 2249-555X | IF : 5.397 | IC Value : .
