Money & Banking

Insurance regulator urges tighter checks, training to prevent frauds

Our Bureau Mumbai | Updated on February 10, 2016

Nilesh Sathe, Member (Life), at IRDAI

Focus on increasing topline key reason for higher number of fraudulent claims

Life insurers need to be careful about fraudulent claims and improve checks from the policy issuance stage, said Nilesh Sathe, Member (Life) at the Insurance Regulatory and Development Authority of India (IRDAI).

Speaking at an event organised by Association of Insurance Claims Management (AICM), Sathe said the insurance industry has to ensure that money does not flow to dishonest people.

“Fraudulent claims occur because of wrong selection of lives, and focus on increasing the topline and showing growth. Underwriting at the basic stage needs to improve and distributors, such as agents, should be trained.”

Ganesh Iyer, President of AICM, said there is a clear trend of high-value fraudulent claims in the industry.

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.

Section 45

Sathe said insurers have to live with Section 45 since it is 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, the industry can take it up with the Centre for amendment. “Many a time, when a claim is not repudiated, 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,” Sathe said.

The regulator, he said, will soon come out with nine regulations that will deal with different areas, such as insurers’ expenses, commissions, and investments. He added that the regulator is looking at streamlining commissions across different segments, such as life, non-life and health.

Meanwhile, Experian, a global information services company, is in the process of setting up an insurance repository for life insurers, which will be active in the next two weeks, said Mohan Jayaraman, Managing Director of Experian Credit Information, and Country Manager of Experian India. The firm has a database of over 40 banks and non-banking finance companies currently on its Hunter fraud detection model.

Published on February 10, 2016

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