Page 9 - Risk Management Bulletin Jan- Mar 2021
P. 9

RMAI BULLETIN JANUARY TO MARCH 2021


             o   Personal interests                           Major Frauds at Proposal Stage are:
             o   Bribery                                      1) Misappropriating Fund
             o   Extortion                                    2) Document Tampering/Misleading Documentation

                                                              3) Misrepresentation of Customer Profiling
             Classification of Frauds in Insurance
                                                              4) Non-Disclosure of Material Facts
             Industry:                                        5) Bogus Business
             Before we move to understand what Fraud Control
             measures the insurer should take, we need to     Major Frauds at New Business Stage are:
             understand what type of Frauds the insurer faces.  1) Medical impersonation/Rebating business
                                                              2) Document Tampering/Misleading Documentation
             Basically, 3 types of frauds an insurer faces:
             X   Policyholder fraud and/or claims fraud - Fraud  3) Incorrect Information during Pre Issuance
                 against an insurer in the purchase and / or     Welcome Call (PIWC)
                 execution of an insurance product, this also  4) Non-Disclosureof Material Facts/ Medical
                 includes frauds at the time of making a claim.  Condition / Health/ Confidential information
                 Example- Exaggerating damages/loss, Fraudulent
                 Death Claims, Medical Claims Fraud           Major Frauds at Policy Servicing Stage are:
                                                              1) Falsifying and / or Damaging / Destroying
             X   Intermediary Fraud - Fraud perpetuated by an
                 insurance agent / corporate agent / intermediary  Documentation
                 / Third Party Administrators (TPAs) against the  2) Signature Forgery
                 insurer and/or policyholders.                3) Misrepresentation of Customer Profile
                 Example -  Adverse selection of clients for  4) Dishonoring of Renewal Premium Cheque
                 insurance cover, Inflating the premium, passing on
                 the correct amount to the insurer and keeping the  Major Frauds at Claims/ Surrender Stage are:
                 difference
                                                              1) Fraudulent Death Claims
             X   Internal Fraud - Fraud / misappropriation against  2) Fake Medical Documents at the time of Claims
                 the insurer by its Director, Management and / or
                 any other office or employee (by whatever name  3) Bogus Claim
                 called)                                      4) Document Tampering/Misleading Documentation
                 Examples - Misappropriating the funds, fraudulent  5) Misrepresentation of Customer Profiling.
                 financial reporting, forging signatures
                                                              6) Signature Forgery
             These types of Frauds occur at different stages of
             Proposal's Life Cycle. Life Cycle of proposal to policy  Examples of actual Frauds from the
             can be depicted as per below figure:             insurance industry at these different
                                                              stages of Life Cycle:
                                                              At Proposal Stage:
                                                              1) Collection of cash from customer & using it for
                                                                 issuance of new policy.
                                                              2) Forgery or alteration of proposal form/cheque /
                                                                 bank draft/financial instrument/account belonging
                                                                 to the company or any document submitted by
                                                                 the customer.
                                                              3) Non-disclosure of the information provided by the
                                                                 customer. (Eg- Medical details /Income details
                     Fig. 4 - Life Cycle of Proposal Form
                                                                 etc.)

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