Life Insurance Fraud

Life Insurance policies launched six-to-seven years ago with fanfare have become a lucrative target for cheats. Although the premium for these policies is high, 'investing' in a few terminally-ill clients can quickly bag a jackpot. "For fraudsters it is an investment. If even one in 12 applications clicks, their investment of Rs 1.2 lakh in premium pays off with a Rs 1crore bonus.



Insurers like HDFC Life say syndicates in Gujarat, Maharashtra and Telangana are behind the scam. In one case, the insurer got 12 death claims from a cancer hospital on the Jaipur-Agra highway. Investigation showed the fraudsters identified individuals with terminal illnesses, promised their families a cut, paid the premium of Rs 10,000 on their behalf and did all the paperwork. Such fraudulent claims usually arise within one to two years of taking the policy.

There are more cases of fraud in low-value policies of Rs 1-2 lakh sum assured. For Rs 1 crore and above, there is a higher level of scrutiny. Medical and financial checks before underwriting the policy also make it "difficult to pull off a fraud with a high-value policy.

The syndicates know insurers cannot verify the medicals of every applicant, so they try "networking with a large group of people to file applications. Max Life rejects around 2% of its claims for fraud.

In one case, a syndicate obtained an unclaimed body from a city mortuary in Begur near Bengaluru to hold a sham funeral. The insurance officer sent to settle the Rs 2lakh claim became suspicious seeing no sign of grief among those present. The claim was rejected. In Angadi Raichur, Telangana, an insurance agent bought a life cover of Rs 12 lakh for a man who had died a month earlier, and filed a claim few months later. 

It has become easy to get fraudulent certificates.Anyone can purchase a policy on someone else's behalf and then claim the person died a few months later. Insurance companies say claims ratio is high and about a third of claims are filed within first month.