After Ponzi chit-fund schemes, it is now the season for fraudulent insurance products.
The popularity of life insurance for tax benefits as well as protection makes it an easy and effective trap. Most fraudsters are either former employees of insurance companies or insurance sub-brokers. These people have access to the database of clients of insurance companies and use it to lure victims.
Insurance accounts for over 12 per cent of the financial assets of Indian households, according to the Central Statistics Office. Over 2,000 cases of fraudulent sale of insurance products have been registered during the last one year, while the industry is estimated to have lost Rs 100 crore potential revenue during the period.
The formula to dupe is simple: You get a call promising a free gold coin or interest-free loan on purchasing an insurance policy. According to industry experts, some insurance agents also offer these freebies to meet sales targets.
Bite, get hooked
Once you ‘bite’, a person comes around to collect the so-called ‘insurance premium’ for the new policy or to surrender an existing one for another. The fraudsters take the personal details and promise to fill the form themselves. Then, they simply disappear with the premium amount.
30% strike rate
Insurance firms believe that the fraudsters have a hit rate of 30 per cent, that is, for every 10 calls made by the fraudsters, at least three customers fall prey.
“We have received 500-odd complaints on this and we have seen a significant increase in the last six months,” said Rajesh Relan, Managing Director and country manager of PNB MetLife.
Reliance Life has registered over 200 FIRs across India to check the mis-selling menace. Seven people have been arrested and 13 detained by the police for interrogation.
HDFC Life has filed over 200 complaints in the last four months. In fact, fraudsters have gone to the extent of using insurance regulator IRDA’s name to make a sale.
HDFC Life Insurance has terminated the services of an insurance broker for fraudulently luring customers. “We have also filed FIRs with the police in some cases and taken strict action against former employees,” said Metilda Stanley, Senior Vice-President, Customer Relations, HDFC Life.
Life insurance companies have collectively approached the Economic Offences Wing of the Delhi Police to investigate the matter.
Independently, insurance companies have started a policy verification process, wherein they call the customer to confirm if he/she really understands all the terms of the policy.
“Customers have to be alert and not fall prey to any person or entity making fraudulent offers of lucrative loans or gains,” said Anup Rau, CEO, Reliance Life Insurance.
“Simple rules of filling in the form with complete and accurate details, understanding the policy terms and benefits, and using only cheques for any transaction will be in the interest of the customers,” Rau said.