Page 40 - Insurance Times July 2023

with ''ZERO TOLERANCE towards FRAUDS'' philosophy. A
Q: Some case studies where companies
dedicated vertical ICLM (Internal control and loss
minimization) independent of claims function, reporting to faced big challenges to deal with fraud.
the Chief Risk Officer of the Company exists to manage frauds
Response:
and leakages in the system.
Healthcare providers often attempt to inflate health claims
Within ICLM function there are specialized teams focussed
by unbundling procedures, increasing length of stay, going
towards managing various risks arising from multiple lines of
for unwanted medical treatments, utilization of unwarranted
business. They engage with skilled professionals like doctors,
higher antibiotics. This inflation ranges anywhere between
advocates, automobile engineers, analytics resources within
15% to 35% in the medical cost of treatment for genuine
the Company and outside too. Claims processing system has
cases and this is a large cause of concern to be addressed by
been enabled with fraud alerts ranging from machine learning
the industry. IRDAI's new move to empanel all health
models, rule engines to trigger claims on real time basis for
loss minimization. Another unit within ICLM focusses on loss providers under GI Council should hopefully address these
minimization resulting from acts committed by employees/ issues to a large extent.
intermediaries and third parties.
Multiple nexuses running around the country have created
On identification and establishment of fraudulent claims; they policy banks and have their clandestine tie ups with
are repudiated. Appropriate punitive measures are taken healthcare providers to either fake health claims or generate
with respect to hard core fraud cases which includes filing highly exaggerated claims.
Police complaints against insured, drivers, claimants, other
On the motor third party claims implanting a vehicle with
entities involved in fraud. For health claims, in addition we
legitimate insurance cover is the single largest cause of
have reported irregularities to various health authorities like
concern and the root cause lies in the high number of
state medical council for further action.
uninsured vehicles in our country. We also observe sometimes
Insight from new pattern of frauds observed are utilized to
non RTA (Road traffic accident) cases do get converted to
run analytics on the portfolio with action bias. At ICICI
either motor TP or motor PA or the standard PA claims under
Lombard we have leveraged the new age technologies in
health.
fraud risk mitigation effectively. AI/ ML based models have
been built using the loss minimization experience and Multiple cartels operate across the country and they sell
integrated with our claims processing systems in Motor and stolen vehicle to unsuspecting customers.
Health for generating real time alerts during claim processing.
Garages often misguide customers to pad up/ jack up claims
Algorithm trained with past fraud data are enabled to detect
with existing damages and or try to cover earlier damages.
patterns or outlier behaviour real-time during claim
processing there by reducing the miss-outs and improved SME facing financial crunch are vulnerable and get lured to
referral quality and outcome with minimal human arson their own assets and cook-up fake fire claim.
intervention in identifying high risk claims. These models
The Insurance industry, in particular, is plagued with frauds
undergo regular upgradation.
and in the absence of any safeguard for the Insurers against
ICLM function utilizes various forensic tests and tools to
these rampant illegal and immoral activities, the Insurers
understand the cause of loss/ fire etc.
are left with no avenue to address their pleas.There is no
To build awareness on anti-fraud policy and to emphasise mechanism for penalizing the fraudsters, as a combat
"ZERO TOLERANCE" to fraud each employee undergoes an measure.
induction program; thus creating each employee as an anti-
While the negative financial impact of fraud on the insurance
fraud crusader. In addition regular circulation of case studies/
industry is understood, the corresponding impact of the fraud
fraud awareness mailers, acts as continuous learning.
on the genuine customers and economy of the country also
Company has invested in ICLM function to continuously
needs to be taken into account. Insurance frauds leads to
monitor and refine process and systems to prevent occurrence
increase in premium on one side and may also impact the
of frauds. In conclusion, a sound ethical culture and an
insurance penetration adversely on the other side due to
effective system of internal control are essential elements of
rate increase on account of frauds.
an anti-fraud strategy. Effective internal controls reduce
exposure to financial / reputational risks and contribute Therefore, insurance frauds need to be defined and classified
towards safeguarding of assets, including the prevention and as a punishable offense in the Insurance Act, 1938, in order
detection of fraud. to protect the interest of insurers and the policyholders.
36 July 2023 The Insurance Times