Mr. S.G. Afzal Biyabani, Resident Editor, The Insurance Times (Saudi Arabia) interacted with Mr.S.K.Sethi, founder and CEO of the Insurance Foundation of India for getting his views on Insurance Frauds. Here are the excerpts:-
According to Mr.S.K.Sethi, India lacks a law specifically targeting all aspects of insurance frauds despite the fact that insurers lost INR450bn ($5.9bn) due to frauds in 2019.
As per a commentary published in Business Today, he noted that most insurers in India lose between 10%-15% of premiums from frauds across all lines of their business, whereas fraudulent health insurance claims can even reach as high as 35%. Further, about 90% of auto insurance frauds are the result of padded claims while the other 10% are from organised accident staging. In the life insurance segment, most frauds are seen where the sum assured is between INR 200,000 and INR1.2m.
Mr Sethi added that in India, there is no specific provision in the Indian Penal Code for insurance frauds. A few sections that have some relevance to Insurance are:
Section 205-false impersonation for the purpose of act or proceeding in suit or persecution;
Section 420-cheating and dishonestly inducing delivery of property;
Section 464-making a false document including signs, seals and forgery and
Section 405-criminal breach of trust.However, these provisions are not adequate to prosecute a fraudster legally in cases of organised insurance frauds.
He noted that the central and state governments shall also have to seriously think about having specific laws to counter insurance frauds and setting up insurance fraud bureaus. This is urgently required as the Indian Insurance Act does not contain a definition for insurance frauds.
Furthermore, due to the mounting backlog of pending judicial cases in Indian courts, taking legal action against insurance fraud is not a common occurrence and insurers often drop their pursuit of fraud cases where these involve amounts not big enough to justify the heavy investment of time and energy in taking the cases to the courts. In addition, compared to other crimes, court sentences for insurance frauds are lenient, reducing the risk of severe or extended punishment, noted Mr. Sethi.
