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Insurance fraud is a deliberate deception perpetrated
against or by an insurance company or agent for the
purpose of fnancial gain. Fraud may be committed at
diferent points in the insurance transaction by
applicants for insurance, policyholders, third-party
claimants or professionals who provide services to
claimants. Insurance agents and company employees
may also commit insurance fraud. Common frauds
include padding, or in!ating actual claims,
misrepresenting facts on an insurance application,
submitting claims for in"uries or damage that never
occurred, and staging accidents.
What is Insurance Fraud?
Insurance fraud occurs when any act is committed with the
intent to fraudulently obtain some beneft or advantage to
which they are not otherwise entitled or someone
#nowingly denies some beneft that is due and to which
someone is entitled.
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Insurance fraud has e$isted ever since the beginning of
insurance as a commercial enterprise.
Fraudulent claims
account for a signifcant portion of all claims received by
insurers, and cost billions of dollars
annually. (ypes of insurance fraud are very diverse, and
occur in all areas of insurance. Insurance crimes also range
in severity, from slightly e$aggerating claims to
deliberately causing accidents or damage. Fraudulent
activities also afect the lives of innocent people, both
directly through accidental or purposeful in"ury or damage,
and indirectly as these crimes cause insurance premiums
to be higher. Insurance fraud poses a very signifcant
problem, and governments and other organi)ations are
ma#ing eforts to deter such activities.

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It is a misconception to regard insurance fraud as a
*victimless+ or *hidden+ crime because, in reality, it costs
everyone. Insurance fraud results in,--igher premiums and
higher prices for goods and services (he costs incurred by
insurance companies or ta#e full operators to combat and
pay fraudulent claims will ultimately be passed on to the
insuring public in the form of higher premiums. Insurance
fraud also results in higher prices for goods and services
as businesses pass the higher cost of insuring their
property and stoc# to their customers. .educed availability
of insurance
What is the scale of insurance fraud in India?
Fraud in India ----opinion
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It+s a guessing game really, but the head honcho with a
general insurer puts it at .s &,/// crore a year. -ow do
you arrive at such a huge fgure0 1imple. 2$trapolate data
from the 3ustralian insurance industry. (hat0s what (ata
3I4 4eneral Insurance managing director 5alip 6erma
seems to thin#. Insurance fraud is estimated to cost
around 789 billion in the :1; it costs the 3ustralian
Insurance sector about 37/.& billion and about 0&billion in
the :<.
=e are assuming that of the annual non-life insurance
gross premium of about .s /9,>89 crore underwritten in
India, ?9 per cent is the claims ratio and &9 per cent of the
claims paid is involved in fraud, he estimates. @ost of the
fraud ta#es place in third-party motor insurance which is
slated to be de-tarifed by 5ecember,0 says @. .amadoss,
chairman and managing director of Ariental Insurance
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Be$t in the pec#ing order, own car claims and health
insurance. 3ccording to industry sources, almost CD per
cent of total frauds is committed in these segments.
.amadoss rec#ons the fgure could be much higher. 2ach
of the four public sector general insurance companies pays
motor insurance claims of about .s &,>99 crore per
annum, of which >9 to E9 per cent would be fraudulent
claims, which ta#es the toll to anywhere between .s &,D99
crore and .s /,999 crore, he says. 1taged accidents and
in!ated bills of damage to ,,vehicles are paralleled by fa#e
bodily in"uries to humans and e$aggerated bills for health
services0 says 6erma.
=hile the insurance companies investigate each and every
claim, they are not as efective due to various reasons,
including certain limitations in the 3cts,0 says .amadoss.
1uch frauds are committed by a ne$us of people, including
company oFcials, agents and even the police. (here are
many instances in Chennai where false FI.s have been
fled,0 adds .amadoss.
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Gately, the CHI has awa#ened to the situation and recently
Chennai -igh Court has ordered that the CHI should loo#
into all the third-party liability claims from the state0 he
says. 3re any steps being ta#en to curb the menace0 (here
is no industry-wide database for sharing fraud and theft
information for the industry, however, he adds that now
the 4eneral Insurance Council under the aegis of I.53 has
ta#en the frst step towards creating a database of car
theft insurance claims. It will prevent a car owner from
ta#ing a motor insurance from another insurer after
claiming car theft insurance for the same car from the
previous insurer, he rec#ons.
Fraud control is the responsibility of the insurance
companies. (he 4eneral Insurance Council has a full
!edged secretary-general, who, I am sure, will ta#e various
steps to combat the problem. 3lso, sharing e$periences
regarding various regions and frauds will be more efective
than "ust a database,0 says C.1. .ao, chairman of
Insurance .egulatory and 5evelopment 3uthority II.53J.
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Life insurance
Gife insurance fraud may involve fa#ing death to claim life
insurance. Fraudsters may sometimes turn up a few years
after disappearing, claiming a loss of memory.
3n e$ample of life insurance fraud is the Kohn 5arwin
disappearance case, which was an investigation into the act
of pseudocide committed by the Hritish former teacher and
prison oFcer Kohn 5arwin, who turned up alive in 5ecember
/99C, fve years after he was thought to have died in a
canoeing accident. 5arwin was reported as LmissingL after
failing to report to wor# following a canoeing trip on @arch
/&, /99/. -e reappeared on 5ecember &, /99C, claiming to
have no memory of the past fve years.
Auto Insurance Fraud:
(his has occurred in india the end of /99E, the Coalition
against Insurance Fraud said that auto insurance fraud
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amounts to 7&E billion in false claims a year. 3 ground
brea#ing study by the Insurance .esearch Council in &MM?
found that one-third of all bodily in"ury claims for auto
accidents contained some amount of fraud. @ost of the >>
out of &99 bodily in"ury claims identifed as fraudulent
included LpaddingL or build-up N e$aggeration of in"uries
based on actual accidents.
Flooded vehicles may appear in used car lots and auction
sales following hurricanes and storms. Consumers
unwittingly purchase these vehicles which may not seem
damaged, but eventually will have e$pensive electrical and
air bag problems. In some states, vehicles that have been
!ooded bear the words salvage only on their titles, usually
indicating that damage to the vehicle has reached about CD
percent of its value. Bo mention of !ood damage is included
in the title. :nscrupulous sellers may switch or clone
manufacturers+ serial number plates and put them on a
!ooded vehicle that has been cleaned up. (hey may also
resell a car that has a salvage title in a state that has more
la$ standards for salvage titles. (his practiceNcalled title
washingNenables a vehicle to obtain a regular title.
Property insurance
Oossible motivations for this can include obtaining payment
that is worth more than the value of the property destroyed,
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or to destroy and subsePuently receive payment for goods
that could not otherwise be sold. 3ccording to 3lfred @anes,
the ma"ority of property insurance crimes involve arson
reason for this is that any evidence that a fre was started by
arson is often destroyed by the fre itself. 3ccording to
the :nited 1tates Fire 3dministration, in the :nited 1tates
there were appro$imately >&,999 fres caused by arson in
/99?, resulting in losses of 7CDD million.
2$ample, (he
@oulin .ouge in Gas 6egas was struc# by arson twice within
? years
3n e$ample is Kohn @agno who hired accomplices to set
fre to his (oronto, Canada hardware store in order to collect
insurance money.
Crop Insurance Fraud:
(he :.1. 5epartment of 3griculture+s .is# @anagement
3gency, which administers the crop insurance program, uses
satellite imaging technology to monitor farm acreage that is
involved in a farmer+s crop insurance claim. (he images have
been used in courts to determine crop insurance fraud. 1ince
/99&, less than &99 cases that used satellite images have
been prosecuted. -owever, teamed with data mining, the
agency has put about &,D99 farms on watch for suspected
fraud. Its spot chec# list, developed through the use of the
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images, has saved ta$payers 7C&-7&&9 million a year in
fraudulent crop insurance claims since /99&.
Medical Equipment Fraud:
2Puipment manufacturers ofer LfreeL products to
individuals. Insurers are then charged for products that were
not needed andQor may not have been delivered.
:nnecessary and sometimes fa#e tests are given to
individuals at health clubs, retirement homes, or shopping
malls and billed to insurance companies or @edicare.
1ervices Bot Oerformed,
Customers or providers bill insurers for services never
rendered by changing bills or submitting fa#e ones.
ealth Insurance Fraud:
-ealth insurance fraud is described as an intentional act of
deceiving, concealing, or misrepresenting information that
results in health care benefts being paid to an individual or
Fraud can be committed by both a member and a provider.
@ember fraud consists of ineligible members andQor
dependents, alterations on enrollment forms, concealing pre-
e$isting conditions, failure to report other
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coverage, prescription drug fraud, and failure to disclose
claims that were a result of a wor# related in"ury. Orovider
fraud consists of claims submitted by bogus physicians,
billing for services not rendered, billing for higher level of
services, diagnosis or treatments that are outside the scope
of practice, alterations on claims submissions, and providing
services while under suspension or when license have been
revo#ed. Independent medical e$aminations are used to
debun# false insurance claims and allow the insurance
company or claimant to see# a non-partial medical view for
in"ury related cases
Letter of Credit Fraud
Gegitimate letters of credit are never sold or ofered as
investments. Gegitimate letters of credit are issued by ban#s
to ensure payment for goods shipped in connection with
international trade.
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Oayment on a letter of credit generally rePuires that the
paying ban# receive documentation certifying that the
goods ordered have been shipped and are en route to their
intended destination.
Getters of credit frauds are often attempted against ban#s
by providing false documentation to show that goods were
shipped when, in fact, no goods or inferior goods were
Ather letter of credit frauds occur when con artists ofer a
Lletter of creditL or Lban# guaranteeL as an investment
wherein the investor is promised huge interest rates on the
order of &99 to >99 percent annually. 1uch investment
LopportunitiesL simply do not e$ist. I1ee Orime Han# Botes
for additional information.J

Insurance fraud loss is estimated per year to be 7/C.? billion.
3utomobile fraud 7&/.> billion, business and commercial
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7&.8 billion, homeowner fraud 7&.8 billion and lifeQdisability
fraud 7&.D billion. Insurance fraud, the white collars second
most costly ofense, costs the 3merican public
appro$imately M?./ billion dollars per year in increased
premiums alone. 3 study in /99& by Conning and Co.
estimated that insurance fraud increases the average
3merican household costs by over 7D999.99Qyear when the
rise in premiums, goods and services are ta#en into
Consideration. -omeowner fraud which includes property
and casualty claims total a sum of about 7>9 billion per
annum. IInsurance information InstituteJ False claims in the
3merican healthcare system cost the :.1. an appro$imate
7DE billion a year. IC3IFJ
In Canada, &9-&DR of claims paid out are fraudulent. (he
sum of general insurance fraud in!ates costs an estimated
7&.> billion per year according to the CCI3F
Internal Fraud!
Internal fraud often includes the creation of a fctitious
company to generate insurance premiums and issue
fraudulent policies. (his is usually performed by professional
con-artists, but there are some red !ags to protect
consumers from being the victim of life insurance fraud.
Follow your instincts; if the deal sounds too good to be true,
it probably is. 5o not allow yourself to feel pressured by an
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agent or company. If an agent does not directly answer your
Puestions or seems particularly evasive, go elsewhere.
He wary of any life insurance plan that promises vanishing
or severely reducing premiums later in the life of the
5on+t sign any applications that have blan# areas throughout
the te$t. (he fraudulent agent or company may later add in
things that you did not agree to with your signature. 3lways
get copies of what you signed.
1ave everything that has to do with the policy that you sign,
including statements, records of correspondence, chec#
stubs, etc. 5on+t buy coverage with terms that you don+t
understand, or feel pressured into buying more than you
Bever pay premiums in cash; always pay by chec# or money
order. 3nd always as# for a receipt for any payments. Bever
buy insurance from an unlicensed agent or company. Sou can
verify this information with your state+s 5epartment of
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E"ternal Fraud!
For insurance companies, there are sets of indicators that
arouse suspicion that a consumer or benefciary is trying to
deceive the company. Aften "ust one of these indicators
would mean little to a company; but evidence of several can
be a severe red !ag. If fraud is proven, the claim will be
denied and the crime will be reported to the authorities.
.emember, insurance fraud is a felony, and comes with strict
Indicators of e"ternal life insurance fraud include:
(he claimant had several small policies in force Ioften
with various companies, andQor of small enough
amounts that no physical e$am was rePuiredJ.
2vidence of fnancial distress directly prior to death
Iindicators include depletionQclosing of accounts, etc.J
.ecent changes in coverage, usually in increments that
don+t rePuire physical e$ams, andQor recent changes in
Inconsistencies, mista#es, andQor blatant lies found on
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Insured was involved in an activity not considered
customary for the person when he or she died.
(he body of said insured is never found, or
identifcation is incomplete Idue to condition of
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I&J (he greater the potential return, the greater the ris#.
I/JInvestments seldom e$ist without some ris# involved.
I>J3lways get information in writing before you give away
any money.
IEJBever let emotions interfere with your business afairs.
IDJBever invest what you cannot aford to lose.
I?JGegitimate ofers will always be there tomorrow.
ICJ(a#e time to do careful research.
I8JIf an ofer sounds too good to be true, it probably is.
IMJ5o not send cash by messenger or overnight mail.
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@ost insurance frauds are felonies. If the amount of money
involved is more than 7&999 the crime is a class 3 felony
punishable by up to &D years in prison. If the amount is
more than 7D99 but less than 7&999, the crime is a class H
felony punishable by up to C years in prison. 3ny insurance
fraud involving less than 7D99 can result in incarceration
for &/ months.
What #ind of people commit insurance fraud?
Insurance fraud is committed by people from all wal#s of
life and in all occupations.
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(he plan shall include the following provisions,
2stablishment of a full time 1pecial Investigations :nit
separate from the underwriting or claims functions of the
insurer, which shall be responsible for investigation of
cases of suspected fraudulent activity and for
implementation of the insurer+s fraud prevention and
reduction activities under the Fraud Orevention Olan.
(he agreement under which such services are provided
shall be fled with the Insurance Frauds Hureau as part of
the Fraud Orevention Olan, and must provide for specifed
levels of staFng devoted to the Investigation of suspected
fraudulent claims.
3 description of the organi)ation of the 1pecial
Investigations :nit, including the titles and "ob descriptions
of the various investigators and investigative supervisors,
the minimum Pualifcations for employment in these
positions in addition to those rePuired by this regulation,
the geographical location and assigned territory of each
investigator and investigative supervisor, the support staf
and other physical resources, including database access
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available to the :nit and the supervisory and reporting
structure within the :nit and between the :nit and the
general management of the insurer.
Orovision for the reporting of fraud data to a data collection
form to be designated by the superintendent.
5evelopment of a public awareness program focused on
the cost and frePuency of insurance fraud, and methods by
which the public can prevent it. 5evelopment of a fraud
detection and procedures manual for use by underwriting,
claims and investigative personnel.2very insurer rePuired
to fle a fraud prevention plan shall fle an annual report
with the Insurance Frauds Hureau no later than Kanuary &D
of each year on a form approved by the superintendent,
describing the insurerTs e$perience, performance and cost
efectiveness in implementing the plan and its proposals
for modifcations to the plan to amend its operations, to
improve performance or to remedy observed defciencies.
(he report shall be reviewed and signed by an e$ecutive
oFcer of the insurer responsible for the operations of the
1pecial Investigations :nit.
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Insurance Fraud In$esti%ations
2ach year insurance companies pay out millions of dollars
in insurance claims. (hese agencies provide thorough
investigation of suspected fraudulent or e$aggerated
insurance claims. 3ll investigations are conducted with the
client+s needs in mind and reported in an accurate, factual
and unbiased manner. (his allows to provide the clients
with the information they rePuire to eFciently handle an
insurance claim. (he services in this area include,
mobile video surveillance
stationary video surveillance
hidden video surveillance
corporate and personal fnancial profles
interviews and witness statements Iwritten, audio or
video U courtroom PualityJ
written surveillance reports detailing investigation
court testimony
forensic accounting
corporate and personal bac#grounds
(he surveillance team is fully trained and ePuipped with the
latest surveillance ePuipment. 2ach investigator is fully
aware of all applicable guidelines and legislation within the
insurance industry.
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(he following compilation has been prepared to assist with
the detection of fraud. @any such lists e$ist as Lfraud
indicatorsL but we do not wish to suggest that the
presence of any of these circumstances necessarily
LindicateL that insurance fraud has been committed.
.ather, we ofer this compilation as potential warning signs
or Lred !agsL that might prompt you to study the matter
more carefully.
Automo&ile Accident Fraud ints
It is important to remember that the hints listed below are
merely possible Lred !agsL that there may be some
evidence consistent with an insurance fraud scheme. 3ny
one or two of these by themselves, may not raise your
suspicion; however, when you have several of these hints
present or a pattern begins to emerge, you should
investigate further or forward your suspicion to the
Insurance Fraud Orevention 5ivision.
@inor accident with large estimate of damages.
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2$pensive damage claims even though the vehicle
remains driveable or did not rePuire towing.
Ohotographs show only damage areas IcanTt identify
ma#eQmodelJ. 3 third party reports the claim.
1erious accident with e$pensive physical damage, but
only minor, sub"ectively diagnosed in"uries with little
or no medical treatment.
(he accident occurred on private property near
residence of those involved.
5ocumentation is not available for damage estimate
or repair.
(he damage estimate is inconsistent with description
of the loss.
(he 6ehicle Identifcation Bumber I6IBJ does not
match the damaged vehicle.
(he handwriting on the estimate matches that of the
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(he repair shops used are not actually ePuipped to
ma#e repairs listed on the estimate.
Claimant vehicles are not readily available for
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Life Insurance Fraud ints
It is important to remember that the hints listed below are
merely possible Lred !agsL that there may be some
evidence consistent with an insurance fraud scheme. 3ny
one or two of these by themselves, may not raise your
suspicion; however, when you have several of these hints
present or a pattern begins to emerge, you should
investigate further or forward your suspicion to the
Insurance Fraud Orevention 5ivision.
I&J (he policyTs efective date is close to the date of
I/J (he deceased is not well #nown by relatives and lived
I>J Oolicies tend to be for small coverage which are many
available in mass oferings, i.e., in maga)ines, mail-in
television advertisements.
IEJ (he agentTs Lloss ratiosL appear unusually s#ewed,
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the si)e of the mar#et and the types of people
IDJ Oolicies rePuiring physical e$aminations are almost
never used in
these schemes.
I?J Bumerous life insurance policies were purchased on
the victim.
5iferent carriers were used in securing coverage for
no apparent
ICJ (he coverage amount is not commensurate with the
position of the deceased; e.g., a loss income clerical
wor#er has a
life insurance estate of millions.
I8J 3n unusually large number of death certifcates were
obtained by
the benefciary.
'eneral Insurance Fraud ints
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It is important to remember that the hints listed below are
merely possible Lred !agsL that there may be some
evidence consistent with an insurance fraud scheme. 3ny
one or two of these by themselves, may not raise your
suspicion; however, when you have several of these hints
present or a pattern begins to emerge, you should
investigate further or forward your suspicion to the
Insurance Fraud Orevention 5ivision.
3n accident occurs after a recent uninsured loss.
(here are no witnesses to the accident.
(here is no police investigation of the accident or
3utomobile accident involves a single car.
3n accident involves an unidentifed third party.
(he claimantTs witness is overly enthusiastic.
(he loss was reported by the claimant, third party, or
Oroperty was repaired or disposed of before fnal
5ocumentation provided consisted of photocopies.
(he #ind of accident or type of vehicles is not typical
those seen on a regular basis.
Insurance premiums paid in cash.
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Insurance premiums paid and all other transaction
conducted in person.
Claimant avoids use of telephone or mail.
Claimant is not #nown at the listed address.
Claimant uses multiple addresses.
Claimant uses post oFce bo$, hotelQmotel room, or
drop as an address.
Claimant is a transient or out-of-towner on vacation.
Claimant is eager to accept blame for an accident.
Claimant is demanding of a Puic#, reduced
Claimant threatens to go to an attorney or physician
claim is not settled Puic#ly.
Claimant is unusually familiar with insurance terms
procedure, medical terminology, vehicle repair
terminology, or Llegalese.L
Claimant has personal, fnancial or business
Claimant is unemployed.
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EAL( I)*+,A)CE F,A+- I)(*:
Bever sign blan# insurance claim forms.
Bever give blan#et authori)ation to a medical
provider to bill
for services rendered.
3s# your medical providers what they will charge and
what you
will be e$pected to pay out-of-poc#et.
Carefully review your insurerTs e$planation of the
statement. Call your insurer and provider if you
have Puestions.
5o not do business with door-to-door or telephone
who tell you that services of medical ePuipment are
4ive your insuranceQ@edicare identifcation only to those
who have provided you with medical services.
<eep accurate records of all health care appointments.
<now if your physician ordered ePuipment for you.
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.o%us ealth Insurance Companies
(he 4eneral 3ccounting AFce has issued two reports
concerning the sale of health insurance plans that lac#
legal authori)ation. (hese plans place the buyer at ris# for
fnancial disaster if serious illness stri#es. Ane report
focuses on consumer vulnerability %&>'. (he other notes
that from /999 to /99/, &EE unauthori)ed entities enrolled
at least &D,999 employers and more than /99,999
policyholders who got stuc# for over 7/99 million in unpaid
claims %&E'. (he investigators found that many of the
entitles bore names similar to those of legitimate
In response to the report, the -ealth Insurance Institute of
3merica is again urging the Bational 3ssociation of
Insurance Commissioners to create an online database of
licensed health insurance companies so that anyone can
easily chec# the legitimacy of companies ofering health
insurance products.
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False insurance claims
Insurance fraud or false insurance claims are insurance
claims fled with the intent to defraud an insurance provider.
In the :nited 1tates insurance fraud is estimated to cost :1
R/EV8CD per person per year with (he Coalition 3gainst
Insurance Fraud estimating the loss to be 789 billion per
year and @edicare estimating fraud in its system costs the
government 7&CM billion per year.
Insurance fraud hurts the average person in two ways. First,
all fraud costs, including losses, investigations, etc., are paid
for by the insured through higher premiums, or, in the case
of government insurance li#e @edicare, in higher ta$es.
1econd, if a particular individual is the target for the fraud,
they have costs such as deductible payments, loss of
property use, etc., as well as higher premiums from the
claim loss and the potential for denial of future coverage.
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1ome memorable e$amples of insurance fraud include the
Former Hritish 4overnment minister KohnW1tonehouse
went missing in &MCE from a beach in @iami. -e was
discovered living under an assumed name in 3ustralia.
5ere# Bicholson and Bi#ole Bagle were accused of
attempting to defraud a Gife insurance company for 7&
million after @r. Bicholson apparently went missing in Bew
Kersey in Kuly /99> and @s Bagle reported him missing and
made a claim on the policy.
4aylan 1weet of 1anW5iego, California, who was a claims
ad"uster for 3llstate Insurance, set up a scheme in /99/ that
included non-e$istent children who were #illed in hit-and-run
auto accidents at non-e$istent intersections by phantom
drun# drivers. 1weet and two others Iwho posed as the
parents of the non-e$istent childrenJ poc#eted 7C&9,999
before being caught by 3llstate.
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Insurance Fraud
Insurance fraud is believed to be the second largest white-
collar crime in the :nited 1tates. Insurance fraud is often
mista#en for a victimless crime, but it afects everyone by
ma#ing insurance premiums more e$pensive.
Fi%htin% .ac# Aur parent company, :niversal 3merican
Financial Corp., is helping the fght against health care fraud
by increasing awareness of the problem among consumers
and employees
If you have reason to suspect insurance fraud against one of
our companies, we encourage you to report your #nowledge
or observations by contacting our Fraud -otline at,
Insurance Fraud Info (he insurance industry in the :nited
1tates consists of more than D,999 companies with over
7&.8 trillion in assets. It is bro#en down into two segments of
ePual importance, propertyQcasualty and lifeQhealth. (he
insurance industry is one of the largest and most
interdependent of the :nited 1tates industries.
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Insurance fraud has become one of the most prevalent and
costly white collar crimes. Oublic concern about the price of
insurance and the solvency of the insurance industry has
prompted the insurance industry to conduct both internal
and e$ternal reviews of the various insurance cost elements.
3ccording to a published study by the Coalition 3gainst
Insurance Fraud IC3IFJ, fraud is among the most prominent
cost components escalating the costs of insurance. (he C3IF
has estimated the annual loss fgures relative to insurance
fraud Inon health insuranceJ to be appro$imately 7/? billion.
Autside of the C3IF fgure, the lifeQdisability insurance
segment of the industry opines that appro$imately 7&.D
billion is lost each year through fraudulent schemes
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Chapter10 IRDA sets up a framework for
preventing frauds in the insurance sector
I,-A is an independent legislative organi)ation formed
under the act of Oarliament. Its "ob is to advance and control
insurance business and to loo# after the interest of and
secure fair dealing to the policy holders. Further Indian
Insurance Companies are regulated by the terms and
conditions of I.53.
I.53 announced that the insurers should draft a 1tandard
Aperating Orocedure I1.A.OJ for monitoring fraud in the
insurance sector and as#ed insurer to carry out due diligence
of the staf and agents. I.53 also stated that insurance
companies ensure that the ris# management function in
organi)ed in such a way that the insurance company is able
to scrutini)e all the ris# and ta#e steps to address them.
P/LIC0/L-E, P,/(EC(I/) A)- WELFA,E
(he 3uthority has been ta#ing a number of initiatives
for better policyholder protection, its primary
mandate, apart from wor#ing towards development of
the insurance sector and the year /9&&-&/ was no
1! Le$era%in% technolo%y
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Insurance policies in e-form
(o provide policyholders a facility to #eep insurance
policies in electronic form and to underta#e changes,
modifcations and revisions in the insurance policy and
also bring in speed and accuracy in issuance and
maintenance of insurance policies the 3uthority has
come out with the guidelines on Insurance
.epositories and electronic issuance of insurance
policies. 3n Insurance .epository is rePuired to obtain
a certifcate of registration from the 3uthority for
carrying out the activity. 3ll insurance policies issued in
electronic form shall be treated as valid insurance
contracts. Insurers shall ensure that the integrity of the
automatic data processing systems is maintained at all
times In order to hold e-insurance policies, a separate and
distinct insurance account needs to be opened with
repositories for #eeping insurance policies in electronic
information furnished by these web aggregators. In
order to ensure this, the 3uthority has issued
guidelines for =eb 3ggregators who maintainQown
a website, provide information pertaining to insurance
products, carry out price comparisons of
products of diferent insurers and ofer leads to a
insurerQinsurance bro#er.
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2! 'rie$ance ,edressal
4rievance .edressal is an important component of
policyholder protection. (he Integrated 4rievance
@anagement 1ystem II4@1J launched last year has
served the purposes of the policyholder, the industry
as well as the .egulator. It ofers policyholders an
online system to not only register and trac# their
grievances but also escalate it to I.53, if need be.
(he real time integration of the grievance
management systems of insurance companies has
created a tool for I.53 to monitor, real time, the
performance of insurers in grievance redressal both
Puantitatively and Pualitatively. (he central repository
of data created by this integration has enabled the
.egulator to , through Pueries and reports, analyse the
data in the repository meaningfully.
3! Educatin% the consumer
If grievance redressal is rec#oned as one side of the
coin when it comes to consumer protection, the other
side is consumer education.
I.53 continues to support consumer bodies in their
eforts to spread word about insurance as well as about
the rights and duties of a policyholder. I.53 supported
seminars conducted by ? bodies during the year
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household contents 5 e"a%%erated claim 5 6hether
insurer entitled to re7ect claim in full 5 6hether
policyholder pressed to disclaim part of loss!
=hen @r K was burgled, he notifed the police and put in a
claim to the frm. -is claim U totalling X>,999 U included a
565 player, &E 565 discs, other audio-visual ePuipment and
=hen the frm Puestioned @r K, it emerged that although he
initially said that he had bought one of the stolen items Ia hi-
fJ for X&D9, he had actually bought it from his brother for
(he frm+s investigator noticed that some of the 565s he had
listed in his claim had not yet been released in the :<. @r K
was unable to e$plain how he had bought them. -e then
admitted he had never owned a 565 player or discs, and he
said he wished to withdraw that part of his claim.
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(he frm re"ected @r K+s claim, citing the policy e$clusion that
enables it to do this if any part of a claim is false or
@r K+s solicitor then said that @r K had been told by the frm+s
investigator that if he said that he had never owned a 565
player, the rest of the claim would be paid more Puic#ly. (he
solicitor also said that @r K had reported the theft of the 565
player to the police and this proved it was a valid claim.
Complaint re7ected
=e were unable to reconcile @r K+s statement with his
solicitor+s assertions. It was hard to believe that, merely to
progress payment for the rest of his claim, @r K was willing to
admit he had claimed for something he did not own. (he
only logical e$planation was that @r. K had deliberately
e$aggerated his loss. 1o the frm was entitled to refuse to
ma#e any payment.
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(/P 8 I)*+,A)CE F,A+-* /F 2992 :I)(E,)A(I/)AL
(he Ahio 5epartment of InsuranceTs fraud unit received
&,&E? fraud referrals with a total claim value of more than
7&> million last year. (he departmentTs eight fraud
investigators closed />E cases last year, a >/ percent
increase from the previous year. Individuals referred to
county and federal prosecutors for criminal prosecution
resulted in EC indictments and E> convictions for insurance
fraud or related crimes 0 a EC and >E percent increase,
respectively, from /99&.
In /99/, the enforcement unit opened C/M cases and
referred >>? for administrative action, a E& and D9 percent
increase, respectively, from /99&. 1i$ty-fve agent licenses
were revo#ed and eight were suspended for violations of
insurance law. In addition, ?D applications for licenses were
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denied for not meeting the minimum Pualifcations outlined
in state law.
1! Company defrauded in$estors of more than <198
million in $iaticum fraud:
(he largest insurance fraud investigation underta#en in the
history of the department, which included cooperation with
the :.1. 3ttorneyTs AFce, the FHI, the I.1 and the :.1. Oostal
Inspection 1ervices, led to the Kanuary /99/ indictment of
Kohn .ichard Kamieson, operator of (oledo-based viatical
settlement company Giberte Capital 4roup, and the
convictions of Kames 3. Capwill, operator of GiberteTs escrow
agency, and &M other individuals.
(he group fraudulently obtained multiple life insurance
policies in order to swindle insurance companies and nearly
>,999 investors of more than 7&9D million in a nationwide
viatical settlements and investments scheme. KamiesonTs
trial is currently set for @ay //. Gast wee#, Capwill pleaded
guilty to one count of money laundering in e$change for &DM
other charges against him being dropped. -e faces up to &/
years in prison
2! In$esti%ation leads to sentencin% of fa#e World
(rade death claimant:
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Cincinnati resident 3"ay Chawla gained national notoriety for
being one of the frst people to try to cash in on the =orld
(rade Center tragedy by fling a false insurance claim for
7&99,999 with CB3 Insurance Co. -e contended that his
father was #illed in the collapse of the twin towers, but the
elder Chawla was actually found to be alive and living in
India. 3"ay Chawla was convicted 1ept. >9 in Hutler County
Common Oleas Court of insurance fraud, theft and
telecommunications fraud, and was sentenced to &/ months
in prison
3! -ayton-area &illin% scam unco$ered:
4reg <noderer, the former owner and operator of a multi-
disciplinary medical practice in the 5ayton area that
included three chiropractors and one medical doctor, was
convicted Act. C in federal court for overbilling and in!ating
the level of services provided to patients. (he fraudulent
billings totaled about 7&.D million over an &8-month period.
<noderer pleaded guilty to one count of aiding and abetting
mail fraud and was placed on probation for three years and
ordered to pay restitution.
=! /$er &illin% scheme netted thousands for
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6ince 5eBittis was a chiropractor who owned a number of
clinics around the state 0 including two in -amilton County
that were the focus of a 5epartment inPuiry. Investigators
learned that 5eBittis trained his staf to over-bill insurers, he
billed patients for visits they did not ma#e, and had
LrunnersL obtain accident reports so that he could bill
insurance companies for Lfree consultationsL ofered to
automobile accident victims. 5eBittisT fraudulent eforts
even included staging an accident involving his girlfriend as
the supposed victim of a hit-and-run accident. -e was
convicted 5ec. &> of insurance and wor#ersT compensation
fraud in e$cess of 7>99,999 and was placed on probation for
two years in lieu of serving an &8-month prison sentence.
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8! Lic#in% County arson-for-hire rin% untan%led:
For years, the 4odbolt family operated an arson-for-hire
ring in Gic#ing County. (he family would purchase homes,
overinsure them and then burn them down. (hey would
also burn down other peopleTs houses on contract to
enable those people to collect the insurance proceeds.
Ohillip, 1ummer, 3llen, 5elphine and :lyssess 4odbolt
were convicted between Feb. E and 1ept. &8 of various
crimes including aggravated arson, insurance fraud,
engaging in a pattern of corrupt activity, and theft, and
were sentenced to prison terms of between one and eight
years. Orosecutors believe the ring netted nearly
Page | 44
Chapter 11 - CONCLUSION
(he insurance is considered as one of the important segment
in an economic for its growth and development. Insurance,
essentially, is an arrangement where the losses e$perienced
by a few are e$tended over servers who are e$posed to
similar ris#s. Insurance is a protection against fnancial loss
arising on the happening on the une$pected event.
Insurance is a one #ind of tool which covers the ris# of losses
and also gives protection against it. Hut it also includes
various #inds of frauds where the insurance companies are
involved. (hese frauds are also done sometimes by the
policy holder towards the company.
1ometimes the insurance agents are also involved in the
scamps and the frauds. (hese frauds need to be stopped and
controlled. (he people who design the policy should design
the policy in such a way that there is no room for ma#ing a
fraud or scamp.
1o this pro"ect gives you an idea about the remedies for
stopping the frauds as well as the penalties and various
types of frauds which are included in the insurance sector.
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