Most Common Types of Life Insurance Frauds

 

What is life insurance fraud?

A life insurance fraud is a deliberate act wherein policyholders, intermediaries, or fraudsters engage in illegal or dishonest actions for monetary gain. Such frauds are intended to deceive either the insurance company or the policyholder.

 

Different Types of Life Insurance Frauds

Learning about the different types of life insurance frauds can help avoid being duped. Let’s look at some of the most common types of life insurance frauds in India.

 

1. Application fraud:

Cases where someone knowingly provides false information on the application form are known as application fraud. Also known as concealment or material misrepresentation, these make for some of the most common frauds in India.

When you apply for a life insurance policy, the insurer requires you to fill out certain information in the application form and may conduct a telemedical interview, to evaluate you. The process may also involve insurance agents or a broker. Hiding information at this stage or misrepresenting facts counts as fraud. For example, if you are a smoker but do not mention so on your application, this would be concealment. The company might be able to find out the truth through your medical reports and might cancel your application in this scenario.

 

2. Phony policy fraud:

Another highly common life insurance fraud in India is fake policy fraud where scammers pretending to be life insurance agents offer you a fake policy and pocket the premiums you pay. The fraudsters pretend to represent established brands, like in various other financial scams, and develop trust before setting up payments for the policy.

Take this for example. Mr. Anil received a call after applying for a life insurance policy on the Bajaj Life Insurance website https://www.bajajlifeinsurance.com.

The scammer pretended to be an insurance agent and asked him to share his payment information over the phone. When Mr. Anil was about to make the payment, he realised that the payee was someone else and not the company. This made him doubt the caller and he decided to immediately report him at company’s official mail id.

 

3. Fake claims:

Claims fraud refers to a life insurance fraud that involves faking a death or murder to claim the money. People often fake their own death or the death of a loved one to avail themselves the benefits of a life insurance policy. Another way a fraudster can claim life insurance is by killing the policyholder in order to avail the policy benefits. Though a bit lower in numbers, people do go out to such extent for the pay-out.

 

4. Fake Accidents

This type of fraud usually occurs when policyholders have chosen the accidental death benefit rider. Under this fraud, policyholders can intimate insurers of fake accidents to get payout.

 

5. Money Laundering

Under money laundering, individuals try to use life insurance products to legitimise illegal funds or black money by using them for legal financial transactions. Through money laundering activities, individuals try to hide the origin of illegitimate funds.

 

Key Takeaways

1. Insurance fraud are deliberate activities conducted to deceive insurers or policyholders for monetary gains.
2. Some of the common types of insurance fraud include application fraud, fake claims, money laundering, and phone policy fraud.
3. It is important to stay vigilant about these frauds to prevent monetary losses.

 

Conclusion

You can save yourself from such frauds by verifying and ensuring that you work with licensed insurance agents. Check their client history and run a background check before you make any payments. Review your life insurance policy regularly to ensure that your policy details are correct and have not been tampered with. It is important to handle your policies with utmost care and safety, as you age.

Stay alert, stay safe from online frauds in India.

Savdhan Rahein. Safe Rahein

 

FAQs

 

1. What are the most common frauds?

Some of the common types of life insurance fraud include making a fake claim, providing incorrect or false information on the policy form, selling fake policies, money laundering, etc.

 

2. What legal consequences exist for committing life insurance fraud?

If you commit life insurance fraud and are caught, you might face legal consequences in the form of criminal charges under different sections of the Bharatiya Nyaya Sanhita.

 

3. Are there cases of identity theft in life insurance fraud?

Identity theft is also a common type of fraud in life insurance. Fraudsters are increasingly using Aadhaar-linked identity systems for filing bogus claims and cheating insurers.