Insurance frauds are pervasive, both within India and outside the country. As per statistics shared by India-forensic, a renowned name in forensic accounting, the insurance sector in India loses more than INR 30,000 crores every year owing to fraudulent practices. The Indian health insurance sector continues to be at the receiving end of malpractices, thus prompting the Insurance Regulatory Development Authority of India (IRDAI) to tighten insurance rules. The losses suffered due to fraudulent health insurance claims have a direct bearing on the pricing, which explains insurers’ decision to raise premium charges to make up for the losses suffered.
Insurance frauds are mostly committed with the intent to earn profits from insurance contracts made or entered into with an insurance company. For example, many customers looking to benefit from the health insurance policies bought may consider providing false or misleading information to the insurer. Non-disclosure or false disclosure may be made to either:-
Getting the insurance premium charges reduced
Getting those claims settled that otherwise would not have been possible.
Health Care Frauds by Those Insured
An individual policyholder may carry out health insurance fraud by:-
- Lending permission to some outsider to use the identity of the insured and sharing necessary details to obtain affordable healthcare made possible with insurance only;
- Using benefits by health insurance plans for making payments towards medical bills for illnesses covered under the policy.
Health Care Frauds by Insurers
Instances of frauds committed by health insurance companies in the past have also come to light. These include:-
- Submitting bills for services or surgical procedures or availing medical supplies that were never provided in the first place
- Charging in addition to the costs of medical services actually provided
- Misrepresentation of non-covered treatment options as a medical necessity
- Showing on record false medical services provided to seek claims from health insurance companies
- Submitting incorrect details of patients’ diagnosis to give grounds for tests, surgeries or other medical procedures carried out
- Billing every step of every procedure in a way to misrepresent each of them as separate procedures
- Billing or charging the patient way more than the amount agreed under the copayment clause between the insurer and the insured
- Promising “kickbacks” for referring victims of motor vehicle accidents for treatment.
Different Types of Health Insurance Frauds
Although there is no particular definition of insurance fraud advanced by the Insurance Act 1938, the IRDAI has classified the concept of insurance fraud in India into three main types. These may be explained as under:-
- Claim fraud: Also called policyholder fraud, this is the kind of fraud committed against the insurance company while buying or paying for a policy. This kind of insurance fraud also includes any kind of wrong or false information shared at the time of claim.
The most common kinds of claim frauds committed by policyholders include:-
- Hiding details of pre-existing illnesses: This is a common kind of fraud that has led to many health insurance companies, especially the private insurance companies, withhold claims during the settlement process. Policyholders conceal information or important details about any pre-existing disorders they may have been suffering from as many individual health insurance plans mandate a waiting period ranging between two and three years for diseases that customers may already be afflicted with. To seek immediate advantage of the health plans bought, some customers engineer false health records or maneuver medical findings at the time of health checkup before buying the policy.
- Submitting false documents to meet policy terms: Young and healthy people are less likely to make any kind of health insurance claims. This explains why most health insurance companies are more inclined to insure younger customers. Since the premiums of most health care plans are more for those belonging to a higher age bracket, many customers submit fake documents with manipulated age details.
- Giving false bills of medical expenses: Many health insurance companies pay in cash for the hospitalization expenses incurred or reimburse the amount spent on medical treatment or surgery carried out. However, some view buying health insurance plans as a way of earning profits. These customers submit forged bills and claim money even if the insured has not been hospitalized or no medical expenses incurred on his/her treatment. Submitting inflated medical bills also amounts to fraudulent practices and are classified as a kind of insurance fraud in India.
- Buying multiple health insurance policies: Buying multiple health insurance plans from different health insurance companies is not an uncommon affair. With different health care plans promising varying benefits, an increasing number of people are opting to buy more than one plan. Though it is not illegal to buy multiple policies, individual or group, customers often refrain from informing their insurers about the multiple policies that they are paying for. It is important for the customers to keep their insurance companies in the loop if they are buying more than one policy. Buying multiple policies with an intent to make multiple claims and, thereby, earn profits amounts to insurance fraud in India.
- Being a part of fraud rings: Insurance frauds often involve the participation of more than the more policyholders alone and involve an illegal collaboration between physicians, insurance agents, insurers and chemists. Customers often connive with physicians for false medical prescriptions or chemists for inflated medical bills to seek money from claims.
- Filing fake disability claims: Social health insurance schemes introduced by the central government and some of the state governments in India have resulted in a sudden spurt in false claims on health insurance plans.
- Fake accidental claims: Fake accidents are staged in order to claim compensation from policies promising cover on accidental death or disabilities suffered from the accident.
- Internal fraud : This kind of fraud is intrinsic to the insurance company and effects from within owing to any fraudulent practices or misappropriation of documents made with the intent to deceive the company.
- Intermediary fraud: This is the kind of fraud carried on by any intermediary, online or offline, and works against the interests of either the insurance company or those who are insured.
Explaining how reducing insurance frauds can help consumers in the long run, R Chandrasekaran, Secretary-General, General Insurance Council had shared, “If frauds reduce, claim ratio improves, it makes a case for a lower premium.”
Health Insurance Frauds Vs Mistakes
Insurance is relatively a new concept in India. Not many people in the country are aware of its nuances, thus resulting in unwarranted mistakes that get labelled as insurance frauds, if not carefully evaluated. To be classified as a fraud, it is important that the act of omission or wrongful submission has been done willfully. Ignorance of basic insurance features and necessary details may result in customers, healthcare providers or insurance companies doing away with pertinent information or creating improper bills or making wrong payments.
While instances of insurance fraud in India are on the rise, it is important to look carefully before understanding if an inadvertent mistake has been committed or whether there has been an attempt to seek claims through deliberate planning and implementation of false measures.