How Fraudulent Claims Hit Insurers... And You

If what stakeholders say is true, the industry could be losing a billion dollars to health insurance fraud

- Aprajita Sharma

In May, a Navi Mumbai resident's family bought a personal accident policy in his name from Aditya Birla Health Insurance Company (ABHI). While that in itself is a perfectly routine transaction - hundreds of people do so every day - there was a catch. The man who was insured had died of natural causes a few days earlier. After a month or so, the family lodged a 50 lakh claim saying that he had died in an accident. But the elaborate scheme failed, says Mayank Bathwal, the insurer's chief executive officer. "We got hold of the original death certificate and could figure out that the policy was issued on 17 May, while the death had occurred on 13 May."

In another case, in Udaipur, Rajasthan, also involving ABHI, the person insured died due to chronic kidney disease (CKD) whereas a claim was raised under a personal accident policy. The claimant, using local connections, had provided forged documents (such as a fake FIR and postmortem report) to make the death look accidental and take advantage of the insurance policy. After due diligence, the ABHI team found that the insured was suffering from CKD. Documents proving the death was due to a medical condition were sourced from the hospital and the claim was rejected.

While ABHI managed to spot the fraud in both cases, there are many instances where insurers fail to do so. Simply put, frauds are a constant threat for the health insurance industry. They can be perpetrated by individuals, as in the two cases above, or by hospitals themselves, in connivance with policyholders.

The industry categorizes these crimes into two categories: hard and soft fraud. Hard fraud involves shady hospitals trying to swindle insurers. Soft fraud, meanwhile, has two sub-categories, and even reputed hospitals have been known to indulge in it to drive up revenue.