Page 257 - Ebook health insurance IC27

Sashi Publications

Questions and Answers

Q1. Why there is a need to focus on eliminating or reducing fraudulent claims?
Ans. Frauds are prevalent in any type of industry and in insurance too, the fraudsters

think and try to identify various loopholes in order to get fraudulent claims. Various
estimates indicate that fraudulent claims in the industry amount to around 20% of
the total claims. Health Insurance being a less profitable sector ( due to its high
claim ratio) , it is all the more needed to focus on eliminating or reducing fraudulent
claims.

Q2. Classify frauds. Explain the types of frauds.
Ans. Fraud claims are wide ranging, from mis-represented services, services not

rendered, and services rendered to 'rented patients', to a broader spectrum of
various revenue enhancement mechanisms. Frauds are classified as :
(a) Internal and External - Internal frauds are those, perpetrated against an

insurance company or its policyholders by agents, managers, executives or
other employees. External frauds are directed against a company by
individuals or entities as diverse as medical service providers, policyholders,
beneficiaries, medical consumable vendors etc.

(b) Hard and Soft - Hard fraud is a deliberate attempt to stage an event or an
accident, which requires hospitalization or other type of loss that would be
covered under a medical insurance policy. Soft fraud, which is also called
opportunity fraud, occurs when a policyholder or claimant exaggerates a
legitimate claim. Soft fraud also may occur when people purposely provide
false information with regards to the pre-existing illness or other relevant
information to influence the underwriting process in their favour.

(c) Provider and Consumer - Fraud can be committed both by the insured

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