How to Spot Insurance Frauds and Protect Yourself from Them?

Insurance frauds are rising in India, but there are ways to protect yourself from being a victim.

These days insurance frauds in India are a genuine problem. Few of us have not been harassed by relentless calls from ‘insurance’ companies. These calls are a nuisance and can also threaten vulnerable people, who may fall for their claims. On the flip side are elaborate schemes to trick insurance companies and obtain funds illegally. Both types of insurance fraud can cause lasting financial damage. 

As the different types of insurance fraud get more elaborate, we must educate ourselves about what to expect and how to stay safe. 

• Claim theft is when someone falsely claims insurance benefits, such as medical expenses, disability payments, or property damage.
   
• Identity thefts occur when someone steals another person's identity to make a false claim for insurance benefits.
   
• Policyholders’ fraud is when policyholders provide false information to their insurance company to obtain lower premiums or other benefits.
   
• Application fraud is when a customer provides false information on their application to obtain insurance coverage.
   
• Premium diversion is when an insurance agent or broker collects premiums from clients but fails to remit the funds to the insurance company.
   
• Staged accidents are when someone deliberately causes an accident to make a false insurance claim.
   
• Agent Fraud occurs when an insurance agent deceives their clients for personal gain. This fraud can happen in various ways, such as selling fake insurance policies or diverting insurance premiums for personal use.

If this all sounds overwhelming, never fear. You can do several things to protect yourself from these types of fraud. 

Firstly, read your policy carefully and make sure you understand the terms and conditions. Secondly, be cautious when providing personal information to insurance companies or agents. Only give out your Aadhar, PAN number, or other sensitive information if you are sure it is necessary.

Also Read: How Safe Are Private Life Insurance Companies in India?

How to protect yourself from insurance fraud?

1. Be vigilant and sceptical while purchasing insurance policies. Ask all the questions you need to be assured of your safety and security. 

2. Verify the identity and credentials of the insurance agent, broker or company before buying any policy.

3. Research the insurance company and its reputation thoroughly before purchasing any policy.

4. Read the policy documents and terms and conditions carefully before signing up for any insurance policy.

5. Do not provide any personal or financial information to unknown individuals or companies.

6. Keep all the policy documents and records safe for future reference.

7. Be wary of unsolicited calls, emails or messages related to insurance policies.

8. Report any suspicious activity or fraudulent behaviour to the concerned authorities.

9. Keep a close eye on your credit reports and financial statements for unauthorised transactions.

10. Stay informed and updated about the latest insurance fraud schemes and tactics.

By being alert to the various types of insurance fraud and taking appropriate measures, you can protect your insurance benefits and prevent fraud from happening to you.

Insurance policy red flags are warning signs indicating an insurance policy might be fraudulent. Here are some common red flags to watch out for:

• If an insurance policy promises significantly higher returns than other policies provide, it could be a scam.

• If an insurance agent is pressuring you to buy a policy immediately without giving you time to read the terms and conditions or consult a financial advisor, it is more often than not a scam.

• It could be fraud if you receive a request for an insurance policy out of the blue, mainly via email or phone call.

• If the terms and conditions of an insurance policy are vague or hard to understand or if the agent is unwilling to explain them clearly, this may be a red flag.

• If the agent selling you the policy is not licensed, beware and take proceed with caution 

• It could be a red flag if there are discrepancies between the documents you receive and what the agent tells you or if the records are incomplete or inconsistent.

• An insurance policy with a meagre premium or high deductible that sounds too good to be true could signify a scam.

Awareness of these red flags can help you avoid falling victim to insurance scams and protect your finances.