A 49-year-old man allegedly lost Rs 2.24 crore to insurance fraud in Maharashtra’s Raigad district. In his complaint to the police, the resident of Kamothe, near Mumbai, said he lost the money over three years to a person who claimed to be from the insurance regulator's Integrated Grievance Management System, earlier known as IGMS.

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Well, this is not the first case when an individual lost his money to someone posing as an insurance agent. In recent years, India has witnessed a concerning rise in insurance fraud cases. This uptick in fraudulent activities within the insurance sector has raised significant concerns among industry stakeholders, law enforcement, and consumers alike.

Scams in the insurance sector often target unsuspecting individuals with false promises and misleading information.

Here are some common scams to be aware of:

Fake policies

Among the most prevalent frauds adopted by fraudsters is posing falsely as insurance agents and issuing fake policies to them.

"This is done both online and through telephonic interactions, where such scamsters gain the trust of the individual by using publicly accessible information with an intent to establish authenticity, only to defraud them later," said Rasika Kuber, Head – Legal and Compliance at Digit General Insurance, an insurtech startup.

Fraud by intermediaries

Dishonest insurance agents or brokers might also manipulate policy details, premiums, or coverage terms to benefit themselves while leaving policyholders with inadequate coverage.

Premium diversion

According to Aftab Chaz, Associate Director and Business Head at Elephant.in, an insurtech consulting and advisory platform, some agents may even collect premium payments from policyholders, but not remit the funds to the insurance company.

"Policyholders believe they are covered when, in reality, their policies have lapsed," Chaz told CNBC-TV18.

Identity theft

Scammers may steal personal information and use it to purchase insurance policies under someone else's name, then file fake claims.

Interest-free loan promise

Some fraudsters sell policies by falsely promising interest-free loans to small businesses.

Premium refund for a lapsed policy

Scammers may try to sell new policies by guaranteeing refunds for previously lapsed policy premiums.

"Customers cannot get a refund in lapsed policies. They can only get Surrender Value. Only in the case of ULIP can they get the discontinuation fund after five years and to claim this, they don't need to buy any new policy," said Shilpa Arora, Co-Founder and COO at Insurance Samadhan, an insurance grievance redressal platform.

Job assurance

Some fraudsters may even lure individuals with job promises connected to insurance policies.

Misleading investment returns

According to Arora, customers should be wary of policies promising higher returns than fixed deposits, especially if they're marketed as single-pay products while being regular-pay policies.

Tower installation income

Scammers might claim that buying a policy will lead to a steady income from the installation of telecom towers.

"Stay cautious and verify the legitimacy of such offers," Arora said.

How to protect yourself from falling prey to fraud?

Staying wary of insurance scams is important to protect the finances.

"Before engaging with any insurance company, it is advised to thoroughly research their reliability by verifying their licences and looking at reviews. One should be careful of unexpected offers and high-pressure sales methods, as real insurers do not use such tactics. One should also prioritise reading the fine print, independently verifying official contact information, and avoiding upfront payments. It is crucial to protect critical information, contact trustworthy experts, and report suspected activities to relevant authorities as soon as possible. Staying educated is critical in a continuously changing field of fraud," Chaz said.

Apart from these, if a third-party person approaches posing as an insurance intermediary, customers should ask them to furnish their details or show their ID card.

"Consumers can cross-check their authenticity directly with the insurer as well. One should maintain a record of any payments made towards insurance premiums and ensure that the policy copy/premium receipt is received, which reflects the premium so paid. In case of any online transactions, verify the website URL, its HTTPS encryption, etc, to ascertain the authenticity of the company website," Kuber said.

Methods of recourse

The insurance company calls customers before and after the issuance of insurance policies to explain the benefits. Consumers should listen to them and get clarification.

"In case the policy is sold by a scammer, users have a 15-day free-look period to cancel and get a refund. They can write to the customer care or grievance officer of the insurance company, explaining the situation and requesting a refund. Platforms like Bima Bharosa are also available where one can file a complaint, detailing the misrepresentation experienced. If the insurance company's response is unsatisfactory, the victim can even reach out to the insurance ombudsman for assistance in resolving the issue," Arora of Insurance Samadhan said.

If other avenues fail, a victim can consider filing a case in the consumer court to seek resolution and compensation.

First Published:Aug 8, 2023 5:25 PM IST