Group I

Universal Definition of Fraud/Abuse/Leakage, key players in perpetrating fraud, roles controls. The key purpose is to define exact problem and its root cause so that it can be effectively addressed

Any act committed
 with the intent to cheat ,
 obtain some benefit or advantage to which they are not

otherwise entitled or  someone knowingly denies some benefit that is due and to which some one is entitled

 Misuse of position to gain a higher benefit.  Overcharging for services that are not required or


Resultant losses due to inefficient processes which could be intentional or non intentional.

Specific Contribution in detail to each type Sales /marketing team Fraud Abuse Leakage by :Premium Siphoning Intentional Non Disclosure √ √

Mis selling
Phantom Policies Assisting/Lobbying and pressuring for fake claims

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Kickback Incomplete Application form

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Underwriting Lapses/Product features Accepting Fake documents Collusion and Underquoting Backdating CB leakage due to non reporting of previous years claims Different stand by IC on standard exclusions/Non Medicals Ambiguity in policy wordings




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Customer’s Lack of Awareness/delib erate acts Fake claims Impersonation Opting tertiary care centre for primary care services Hiding information Incomplete address




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Health care Provider Practises




Fake claims
Inflation Unbundling of services Manipulation of bills/diagnosis to suit the admissibility Photo ID

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 Training
 Spreading awareness to agents, customers and service

providers  Vigilant Underwriting and claims management  Efficient recovery mechanism  Strict action -Expose and publish  Void Policy  Litigation

Fraud -Defined
The word ‘fraud’ is not defined in Indian Penal Code; instead what constitutes doing a thing fraudulently is explained. The Indian Penal Code There is no separate legislation dealing with fraud as in the United Kingdom or the USA. Fraudulent activities are covered by the Indian Penal on 25 defines the expression ‘fraudulently’ – ‘a person is said to do a thing fraudulently if he does that with intent to defraud but not otherwise’. The expression fraudulently occurs in Sections 206, 207, 208, 242, 246, 247, 252, 253, 261, 262, 263 and Sections 421 to 424.

Sections 24 and 23 define expressions ‘dishonestly’ and ‘wrongful gain and wrongful loss. ‘Wrongful gain’ is gain by unlawful means of property which the person gaining is not legally entitled. ‘Wrongful loss’ is the loss by unlawful means of property to which the person losing it is legally entitled. Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing ‘dishonestly’.

Indian Penal Code – Fraud recognition
Indian Penal Code recognizes the following acts as fraud:  a. Impersonation  b. Counterfeiting  c. Wrong weighing and measurement  d. Misappropriation  e. Criminal breach of trust  f. Cheating  g. Dishonest dealing in property  h. Mischief  i. Forgery  j. Falsification  k. Possessing stolen property  l. Concealment

 Claim leakage represents the difference between the amount actually paid on claim

 What should have been paid.
 It is the money lost during the claim settlement process.

How to contain Leakages
 Speed and efficiency.
 Exception handling  Establish business rules  Increase data integrity  Data mining.  Trend analysis.

Fraud is defined as "any behavior by which one person intends to gain a dishonest advantage over another". In other words , fraud is an act or omission which is intended to cause wrongful gain to one person and wrongful loss to the other, either by way of concealment of facts or otherwise. Fraud is defined u/s 421 of the Indian Penal Code and u/s 17 of the Indian Contract Act. Article Source:

Definition of Fraud
Thus essential elements of frauds are: 1. There must be a representation and assertion; 2. It must relate to a fact; 3. It must be with the knowledge that it is false or without belief in its truth; and 4. It must induce another to act upon the assertion in question or to do or not to do certain act.

Definition of Fraud as per Indian Contract Act
 Sec-17 OF Indian contract Act ,1872
 Fraud means and includes any of the following

acts committed by a party to a contract or with his connivance or by his agent ,with the intent to deceive another party thereto or his agent or to induce him to enter into the contract

 The suggestions as to the fact ,of that which is not true, by one who does not believe it to be true.
 Active concealment by one who is having

knowledge of the fact  A promise made with no intention to perform it  Any act fitted to deceive  Act or omission declared by the law to be fraudulent

Fraud – its essentials
 Must be committed with the intention to deceive
 Must actually deceive the other person- sec-19 –A fraud which did not cause the consent to a contract of the party on whom such fraud was practised, doesn't render the contract voidable- in other words if the consent of the party is not caused by fraud ,he or she cannot complain of it.

 Must be committed by the parties to the contract.

 Mere silence is not fraud- sec-17 mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud. But silence can amount to fraud when there is either duty to speak or where silence is equivalent to speech – fiduciary relationship – insurance is a contract of absolute good faith- where there is duty to disclose –silence amounts to fraud. Half truth also amounts to fraud

What constitutes fraud
 1.False statement of fact  2. Active concealment of fact a. there is a concealment of fact  b. it is active in the sense that all efforts made to conceal it  c. and it has been made by the party who has the knowledge of it.  Effect –voidable  Remedy – rescind or affirm

 Health insurance fraud is described as an intentional act of
deceiving, concealing, or misrepresenting information that results in healthcare benefits being paid illegimately to an individual or group.  Fraud claims are wide-ranging, from misrepresented services, services not rendered and services rendered to 'rented' patients, to a broad spectrum of revenue-enhancement mechanisms  The estimated number of ‘Fraud & Abuse’ cases in Indian healthcare insurance is estimated at around 25-40% of total claims.

 The main purpose of fraud is financial gain.
 As per one report, the healthcare insurance in India may be losing
approximately 1000 crore INR under Fraud & Abuse per annum

 Sec-18 of Indian Contract Act-I. The positive assertion ; in a

manner not warranted by the information of person making it ,of that which is not true , though he believes it to be true. 2. Any breach of duty which without an intent to deceive ,gains an advantage to the person committing it ,or anyone claiming under him ,by misleading another to his prejudice or to the prejudice of anyone claiming under him .3. Causing ,however, innocently a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

 Misrepresentation is an innocent misstatement of facts – positive false statement made without any basis of information ; a breach of duty which brings advantage to the person committing it ; inducement of mistake about the subject matter
 Legal rules for misrepresentation- 1. It must be of material facts- a mere expression of one’s opinion

is not a statement of facts

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