Insurers have ticked several pockets in Gujarat, West Bengal, Bihar, Andhra Pradesh, Uttar Pradesh, and Odisha as fraud-prone with instances of misuse of insurance cover and fraudulent claims increasing exponentially in these areas.
The move follows insurance companies’ complaints last year about the high claims ratio of the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), a pro-poor government-sponsored policy that offers a renewable life cover of Rs 2 lakh for a premium of Rs 330 a year.
Data revealed that 30% of the claims came within the first 30 days of the person getting insured under this scheme. Corrupt practices and fraud were suspected as in most of these cases the insured person “died” within a month of taking the insurance cover.
Instances of medical insurance cover being used by relatives of the beneficiary are common in these areas. Besides, there have been several reports of life insurance cover being claimed producing fake death certificates.
“This needs to be addressed. There have been instances of fake certificates being produced to get insurance benefits. The trend can be noticed in both life and commodities segments,” said Jagvinder Brar, partner, forensic services, KPMG.
All insurance companies, based on their internal assessment, have marked as red zones several areas in Gujarat, West Bengal and the other states from where such claims have been reported frequently.
“Insurance companies are wary of customers belonging to these areas ... the scrutiny on know your customer for a new policy is more stringent in these places,” a senior executive of a large private sector insurance company said. He didn’t wish to be named.
Political compulsions, however, have kept the issue under wraps, sources said.
The rise in suspected fraudulent claims has impacted the insurance sector’s plans to take their schemes to people in rural and semi-urban areas.
Central Vigilance Commission (CVC), the country’s anti-corruption watchdog, is looking into the suspected fraud in insurance claims.
“We have received complaints of frauds and we are monitoring,” chief vigilance commissioner TM Bhasin said.
Frauds in the country’s insurance segment have risen rapidly. Industry estimates suggest a more than 40% increase in corrupt practices compared to a couple of years ago.