Getting deeper into Insurance frauds

“In one case in Andhra, where husband had killed his wife for insurance money, we persisted for 3 years and, finally, after writing to DGP, a young IPS officer – Tarun Joshi – did justice to the case, investigated it thoroughly and charge-sheeted the husband for murder. We feel great sense of satisfaction that we broke the notion that cases charge-sheeted by police cannot be re-opened; we wrote to senior officials of police with enough evidence which led to re-opening of closed cases and arrest of fraudsters, some of them advocates,” said Mr. Ashish Joshi – Head, Special Investigations Unit (Claims) at Tata AIG General Insurance Company Ltd. while speaking to the Riskpro team.

Mr. Joshi, who was working with the Central Bureau of Investigation (CBI), resigned from there and joined the Tata AIG General Insurance Company as Head of Special Investigations Unit (SIU), which is the counter fraud unit of the company, handling primarily claim frauds. Like CBI, he has also played an influential role in the Insurance sector. He has written large number of articles and also been a speaker in lots of conferences and seminars. In one of his articles named ‘Magnitude of fraud & State of anti-fraud efforts in the Insurance Sector in India – an overview’, which appeared in May 09 issue of “Pravartak – The Journal of Insurance & Risk Management”, Mr. Joshi had estimated the magnitude of insurance frauds in India at Rs. 22,000 cr. for FY 2007-08, which came to 12% of the total insurance premium (life & non-life) for that year.


According to Mr. Joshi, in next few years, the biggest threat before the General Insurance Industry in India is ‘frauds in bodily injury claims – called as third party claims’. It is a major area that will continue to bleed non-life insurers in a big way. Such frauds are getting more organized, with involvement of professionals & law enforcement agencies.


Then, with increasing health premiums and an environment of poor regulation in the Health Sector, frauds in health claims are increasing and will be another major area, as in the US.

Frauds by Corporate clients also cause a major drain and will continue to be a significant risk in years to come, primarily on account of lack of proactive and stringent steps by insurers.

And lastly, there is also a major threat of frauds in death claims – hitting life as well as non-life companies. Looking at the fact of increasing competition to acquire market share by increasing number of insurers and consequent relaxation of guard, such frauds will also continue.

Reading about such threats, one obviously thinks if there are any improvements in the insurance sectors in order to combat frauds. Mr. Joshi speaks in detail about the Indian as well as global positions of anti-fraud communities.

He says, “Insurance anti-fraud efforts are most developed in the US, where majority of the states have special Insurance Fraud Acts, which criminalize insurance fraud, create Insurance Fraud Bureaus whose members have police powers and are dedicated to investigating insurance fraud. Shared databases, such as that of National Insurance Crime Bureau (NICB) where 1000+ insurers contribute claims data and powerful fraud detection tools that run on them are potent weapons in this fight. Other aspects of the efforts are bodies like National Association of Insurance Commissioners (NAIC) and Coalition Against Insurance Fraud (CAIF) which involve participation of insurers, regulators, consumer bodies to channelize anti-fraud efforts, supported by registers such National Equipment Register (NER) and Art Loss Register which give a distinct edge to its efforts. Even the Federal Bureau of Investigation (FBI) gives special importance to insurance fraud and discusses major cases in its Annual Reports.

In UK, the anti-fraud efforts are driven by the Regulator, the Financial Services Authority (FSA), with an active participation by the insurers. The latter have formed a body, called Insurance Fraud Bureau (not to be confused with IFBs of US, which have police powers). IFB also collects claims data from insurers and runs powerful fraud detection software.

In comparison, many insurers in India are yet to realize the benefits of investing in anti fraud efforts. Most do not have a dedicated team to deal with fraud and many of those which are existing need to move up by inducting the right talent. The experience of West has been that, a dollar invested in anti-fraud efforts leads to returns of five or more dollars. Management support, right professionals, dedicated teams, technology, legal support are requisites at company level. Similarly, at industry level, shared claims databases is need of the hour. Broadly, companies have realized the importance of having such databases. However, it will be a few years before formal databases are operational.

We are also handicapped by lack of agencies similar to IFBs of US as also lack of any specific criminal laws defining insurance fraud. CBI has a Bank Security & Fraud Cell but nothing for insurance fraud. In reply to a petition in Chennai High Court, Govt. of India – after taking views from IRDA – turned down the request for creating an IFB. State Police forces also do not have any specialized agency.

To a great extent, insurance industry has not lobbied for having such progressive steps. In a similar vein, the industry which collects close to Rs. 2 lac cr of premium a year has not paid enough attention to educating customers about how to stop falling prey to frauds (such as fake policies, premium embezzlements), or upgrading skills of law enforcement or sensitizing the judiciary about the magnitude and dangers of insurance fraud.”

According to Mr. Joshi, there is not much scope for using technology to perpetrate insurance fraud because of its unique nature. At the simplest level, persons can use desktop publishing, colour photocopying and printing to create fake policy or other insurance documents (such as cover notes) which are used to defraud customers. Fake internet sites of non-existent insurance companies, attracting customers with low premiums, is a possibility.

There have been cases of credit card fraudsters using insurance sector to pay basic premium or top-up premium and then apply for refund. There have been cases of organized gangs in West, committing identity theft targeting insurance company call centers and canceling policies after changing addresses.

However, since most of the fraud happens at claims stage, and since most major claims get thoroughly investigated, scope for pure technology driven frauds is substantially lower in insurance.

When asked about the most notable fraud case in the insurance domain that he has resolved,
Mr. Joshi says there are lots of cases and each one has its own flavor. He mentioned that with the help of forensic accounting and field investigations, they have proved various claims to be Fraudulent Burglary Claims. To pen a few, we can mention a major fire claim which involved accounting fraud, tax fraud, money laundering & insurance fraud and also a marine claim involving serious money laundering. Mr. Joshi says that at TAIG, they have also been able to help other companies in investigating many death claims.

Mr. Joshi thinks that there are lots of opportunities for the anti-fraud professionals – both within and outside the insurance companies. Many insurers have started creating or strengthening their anti-fraud efforts. Insurance companies require and use investigators which more or less work exclusively for the insurance sector. Such investigators exist in most cities. However, there is always scarcity of good, professional investigators. Since the profession of investigator in the country is not regulated, most do not have the necessary background/ skills of law, evidence, investigation techniques etc. So, there is a huge demand for quality investigators. Not only individual investigators, but there also is room for professional firms who can accept assignments in bulk, across country and deliver results in agreed TATs.

There also is a need of professionals specializing in forensic sciences such as fire investigators, computer forensic investigators, forensic accountants and so on.

While speaking about Riskpro, Mr. Joshi said, “As an anti-fraud professional, I have a desire that Riskpro continues to bring the anti-fraud community together. Riskpro also has certain reach to the student community, where I sincerely feel, that it spreads prospects and need of an anti-fraud career in insurance.”