FRAUDS

FRAUDS
Fraud means and includes any of the following acts committed by a
party to a contract, or with his connivance, or by his agents, with
Intent to deceive another party thereto his agent, or to induce him
to enter into the contract:
a)The suggestion as a fact, of that which is not true, by one who does
not believe it to be true;
b) The active concealment of a fact by one having knowledge or
belief of the fact;
c) A promise made without any intention of performing it;
d) Any other act fitted to deceive;
e) Any such act or omission as the law specially declares to be
fraudulent.
Countries like the US, UK and Australia have special laws on
insurance fraud. Those who are proven guilty are severely punished.
 TYPES OF FRAUDS

Misrepresentation
of facts
Staged
accidents Fake
claims

Types
of
Fake
frauds Non-existing
death
hospitals
certificate

Fake Fake
accidents customer
CLASSIFICATION OF FRAUDS
INTERNAL FRAUD
 Internal frauds are those
committed against an insurance
company or its policyholders by
agents, managers, executives, or
other employees from within.
Frauds done by employee or
agents either independently
or in collusion would be
classify as internal fraud.
EXTERNAL FRAUD
 External frauds are directed
against the insurance company
by individuals or entities like
medical service providers,
policyholders,
beneficiaries,intermediaries etc.
All possible sources of fraud
excluding internal people would
classify under external fraud.
HARD FRAUD SOFT FRAUD

 Hard fraud is a deliberate  It is sometimes called

attempt to defraud the opportunity fraud, occurs
insurer either to stage an when a policyholder or
event or an accident, which claimant exaggerates a
legitimate claim. Soft fraud
requires hospitalization or
may occur when people
other type of loss that
purposely provide false
would be covered under a information with regard to
medical insurance policy. pre-existing illness or other
relevant information to
influence the underwriting
process in favor of the
applicant.
 Frauds by customer

Frauds by provider

Parties
Frauds by agents
involved
in frauds Frauds by
employee/internal sources

Fraud by set of people

Frauds by intermediaries,
TPA,
middlemen
PREVENTION AND CONTROL OF
FRAUDS
1. Network hospitals
a) Restrict number of network hospitals and this would ensure
 Better monitoring
 Divert patient traffic to the network hospital
 Increase revenue for provider from insurance
 Better bargaining for rates
 Working together as partners

b) Empaneling a hospital only after physical inspection.

c) Have a provision for periodic medical audits by the insurer on the network
hospitals which would result in compliance with the agreement terms and
adherence to agreed rates, treatment protocols and billing practices.
d) Depanel the fraudulent providers immediately from cash Jess network,
pursue legal action .
2. The customer
Educate the customer that an increase in Claims outgo for insurers will ultimately
be recovered from the customers by way of Premium increase. Create awareness
that the Sins of a few should not result in Suffering for many
a) Cancel policy of retail customer indulging in fraud and inform HR if fraud is
committed by an employee under group cover.
b) Ask the customer to be alert and not reveal the sum insured to the provider at the
time of admission.
And bring in the realization that the health card is a not a cash/money making card
3.The insurance companies
a)A robust and fast internal audit system
b) Effective vigilance mechanism
c) Encouraging whistle blowers.
d)Swift and definite pnitive action against erring employees and intermediaries.
e) Have a defined policy of fraud control with dedicated team like Special
Investigation Unit.
4.Industry as a whole involved:
The following steps would serve as a deterrent to fraudulent practices by any of the
Parties involved:-
a)Common data base of fraudulent customers, providers, intermediaries
b)Exchange of information
C)Common investigation apparatus
d)Encourage TPAs to investigate more number of claims
e)Re examine sanctity of short TAT for settlement of claims
f)Press for a Medical regulator and insist on standard treatment protocols to be made
mandatory
g)Create a common provider list
h)Invest in periodic inspections jointly and individually
1)Advocate for stronger laws against insurance fraud
j)Pursue criminal proceedings
k)Build dedicated capacity to combat fraud and create awareness about the larger negative
impact of ongoing fraud.
5.Use of technology in fraud prevention and control
Use of technology will become more crucial as the number of people covered and
claims count will increase in time to come. With sophisticated IT tools outlier
Behaviors can be easily identified for potential fraudulent claims. Some examples
of such outlier behaviors to be analyzed further could be:
a) Count of claim per year with nature of illness
b) Claim amount above average
c) Age and disease correlation
d) Gender and disease correlation
e) Claims count and value per location, intermediary, provider,etc.
THANK YOU