1 in 10 insurance claims turns out to be a fraud

MUMBAI: Insurance claim frauds - which are growing in number and getting more innovative - have put insurers in a dilemma. Companies want to simplify the claims process and wipe out the trust deficit faced by insurers. But this is turning out to be tough when frauds are close to one in ten claims in some retail categories.

"Our estimate is that industry frauds are in the range of 10 per cent of claims, which I feel is a conservative one," said Ritesh Kumar, MD & CEO, HDFC Ergo General Insurance. The choice is between being very careful in accepting proposals and liberal in settlement, or in being liberal in accepting proposals and vigilant while settling.

Excess scrutiny in policy issuance makes it difficult to sell in a market with low penetration. But delaying claims worsens the trust deficit among individuals, reflected in the belief that getting claims paid is a challenge.

Simplifying claim settlement is something that most companies are trying to do in order to build a retail portfolio. "If a policyholder who has spent lakhs on an overseas trip claims $300 for lost baggage, we would accept the claim," said Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance.

Even state-owned New India Assurance had a few months earlier launched a householder policy that settles claims for breakdown of electronic equipment where all household items would be covered on good faith without the buyer having to declare each individual item or provide proof of ownership.