Insurers stop policy sales in over 60 localities to prevent fraudulent claims

MUMBAI: Recent frauds in small towns such as Ganjam in Odisha and Kubernagar in Gujarat have prompted insurers such as LIC, ICICI Prudential Life and HDFC Life to ban their agents from selling policies in over 60 localities to prevent fraudulent claims.
Scores of agents and hospitals have also been barred from selling policies. Insurance companies have identified medical centres for serious administrative lapses, which had led to losses in the industry, and have put these centres on the ‘watch list’.
“We have started sharing data on employees, medical centres, distributors and locations and blacklisted those indulging in frauds,” said Amitabh Chaudhry, CEO, HDFC Life. “We reduce our exposure in some of these markets or completely stop selling insurance — the most recent being blacklisting medical centres.”
For the past couple of years, insurance companies, which have been sharing data to detect frauds in the system, have tied up with LexisNexis and Experian to collate database on frauds. However, now they will have to train claims assessors to appropriately document claims decisions and have proper evidence on record to repudiate such frauds.
“With the industry coming together, it will help in detecting and preventing frauds in the sector,” said Ganesh Iyer, senior vice president heading underwriting and claims at Kotak Life.
“We have put around 1,100 medical centres under watch which have been de-paneled by some insurers.”
Companies have also relaxed their underwriting practices to grab market share. For instance, there’s no requirement of medical tests for policies sold online and only a declaration from the policyholder is sought. In other cases, even declaration of good health from agents is considered good enough.
Nilesh Sathe, member-Life, Irda, said that insurance companies could decide not to do any new business in such negative locations. “However, they have to ensure that servicing of existing policies and customers should be available. This will be the right message for fraudsters which will also ensure that we as an industry can collectively work towards fraud prevention,” he said.
Insurance companies have blacklisted some centres such as Meerut and Moradabad in Uttar Pradesh and Darbhanga, Begusarai and Bhagalpur in Bihar. Some other centres like Guntur, Kurnool and Visakhapatnam in Andhra Pradesh are in the negative location list.