Page 9 - Risk Management Bulletin Jan- Mar 2021

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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