Common insurance frauds you should be aware of

According to the Economic Survey 2021-22, life insurance penetration in India recently witnessed a steep rise from 2.82% in 2019 to 3.20% in 2020. Due to the rising uncertainty during the pandemic over the last two years, more people have started acknowledging the importance of life insurance for added financial safety. However, with digital taking precedence across industries, there has been an increase in the number of insurance-related frauds. With data being easily available online, it is easier for scammers to contact and con unsuspecting customers. The insurance industry is taking the efforts needed to mitigate all types of fraud. However, it takes a collective effort from the industry, the agents, partners and the customers to ensure that instances of fraud are reduced or eliminated.

Common insurance frauds

Scamsters and fraudsters looking to lure innocent customers into a financial trap have devised several deceitful schemes over the years. Today, with increased digital adoption and easy availability of data, the methods adopted to commit insurance frauds have also evolved.

Here are the most common ways in which frauds typically occur.

Phone frauds are among the most common ways in which customers are misled. The person(s) committing the fraud pretends to be an insurance agent and sells fake life insurance plans to customers by asking for their personal details. Email frauds often contain a notification that the receiver’s insurance cover has lapsed due to unpaid premiums. The email then encourages them to make the payment to revive the policy by clicking a link online. Some people take insurance frauds a step further and set up entire fake websites to lure in unsuspecting customers. Typically, these websites make promises of zero paperwork and documentation, no KYC and no health check requirements. Instead, they encourage you to sign up with your debit or credit cards, thus collecting your personal and financial details.

In beneficiary payout frauds, the policyholder gets an SMS or an email informing that they are the beneficiary of a distant relative. And to claim the beneficiary payouts, they need to pay a nominal down payment or processing fee, which is actually a fraudulent activity. In OTP frauds, fraudsters may pose as authorities from insurance companies and ask you to share an OTP received on your mobile.

Mis-selling occurs when an intermediary sells you an insurance policy without giving you the whole picture of the costs involved. Alternatively, they may also give out false promises and enhance the features and benefits of a product beyond what is actually offered. Some insurance providers may appear to be genuine, but they may be unauthorized by the IRDAI. Such organizations are illegal, and customers should beware of buying policies from these fraudulent insurance providers.

Protecting customers from frauds?

The Insurance Regulatory and Development Authority of India (IRDAI) has always acted in the best interests of customers. As the cases of insurance frauds rose over the years, so did the IRDAI’s measures to create awareness about the same. From time to time, the regulatory body has issued public notices alerting customers about the possible ways in which frauds could occur.

Insurance providers in the country have also stepped up and made efforts to educate their policyholders about scams and frauds. They conduct periodic awareness sessions for the consumers, issue insurance advisory and circulate information about deceitful activities such as mis-selling. Additionally, they are ramping up their backend processes and systems, using advanced tech interventions like AI & ML to mitigate risks and frauds facing the customers.

Despite the measures outlined above, it is important for you, as a buyer to beware of insurance frauds and take necessary steps to protect yourself against such scams.

Some other ways to protect yourself is to avoid sharing your personal details such as date of birth, bank details, address, etc. with anyone over a phone call, not clicking on any payment links you may receive via SMS or email from unknown sources. You should also steer clear of fake websites and insurance policy offers that are too good to be true. Before sharing your personal information and financial details on an insurer’s website, verify the site’s security protocol. Remember that insurers do not require any down payment or processing fees to settle your claim or any beneficiary payouts. So, any message that requires you to make such payments are best ignored. Also, as has been said for other digital platforms and services, never share any OTP received on your phone with a third party or unknown person.

You should also examine the policy documents thoroughly before signing or making any payments. Insist on checking with insurance agents for their ID proofs to ensure that they are genuine and authorized intermediaries.

Conclusion

The instances outlined above are among the most common frauds that insurance customers often fall prey to. Fortunately, by taking the measures suggested and by being aware and vigilant, you can steer clear of these scams. If you suspect any fraudulent activity or fake offers, ensure that you bring it to the notice of the IRDAI promptly, so the measures necessary to curb such schemes can be taken in a timely manner.

(The writer is the head of legal and compliance at Bajaj Allianz Life)