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Life insurers need to be careful in not settling fraudulent claims and improve their checks at the policy issuance stage, said Nilesh Sathe, Member (Life) at the Insurance Regulatory and Development Authority of India.
Sathe was speaking at an event organised by Association of Insurance Claims Management (AICM). Life insurers have been bracing for a surge in fraudulent claims after the implementation of Section 45 in the Insurance Amendment bill which says that life insurers cannot repudiate a claim after three years of the policy being in force even if a fraud is detected.
Ganesh Iyer, President AICM said that there is a clear trend of high value fraudulent claims in the industry. Sathe, said that insurance industry has to ensure that the money does not flow to dishonest people. "Fraudulent claims occur because of wrong selection of lives and focus on increasing topline and focus on showing growth. Underwriting at the basic stage needs to be improved and distributors such as agents should be trained."
He said that insurers have to live with Section 45 since it is a part of the Insurance act but at the same time ensure that the interest of the industry is protected. He said that after three to five years, when sufficient data is available to show that section 45 has done significant damage then the industry can take it up with the government for amendment. He also said that insurers can identify certain areas which are more prone to fraudulent claims and be more vigilant in disbursing policies in such areas.
"Many times when a claim is not repudiated then most insurers simply write claim rejected or repudiated but it is better if insurers write a speaking order as it will carry more weightage when it is taken to court especially in the case of fraudulent claims," Sathe said.
Sathe said that the regulator will be shortly coming out with nine regulations which deal with different areas such as insurers expenses, commissions, investments among others. He also said that the regulator is looking at streamlining commissions across different segments such as life, non-life and health.
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