Group -5
C026 Omkar Joshi
C048 Shikhar
C059 Syed
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Contents
INTRODUCTION
REFERENCES
10
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INTRODUCTION
Health insurance has historically played a pivotal role in
The Health Insurance has historically played a pivotal role in improving access to
healthcare around the world. Health insurance is a contract between the insurance company
and the insured person to cover the medical costs that will arise from illnesses, accidental
injuries, surgeries and other medical complications. Over the last 50 years, India has achieved
a lot in terms of health improvement. In case of the government funded health care system,
the quality and access of these services has always remained a major concern for everyone.
An extremely fast growing private health market has developed in India. This private
sector market bridges most of the gaps between what government offers and what people
need. However, in the emerging Insurance scenario in India, pricing as well as claims
servicing decide where the Insurance Company would stand. Moreover, with proliferation of
various health care technologies / innovations and general price rise, the costs of care have
also become very expensive and unaffordable to the large segment of the population. In fact,
in the future, claim costs will have a direct bearing on the pricing of the claims. Leakages and
frauds on account of claim / underwriting will adversely affect the claims experience, which
in turn will affect the pricing. Because of the misdeeds of a few people in the society and
because of the lack of effective controls and regulations by the Insurance Companies, the
genuine customers, who constitute the majority, will have to pay higher prices for the
Insurance Products. In an open market with a lot many options available, the consequences
are quite so obvious. Not only because of higher prices it will hamper new customers to come
even existing clients base will start dwindling.
Thus, Marketing of Health care insurance policies is of paramount importance to help the
people to meet out to the untoward expenses arising out of unexpected situations. It is,
therefore, essential for their own survival that Insurance Companies should formulate a claim
management philosophy where concerns on the account of leakages and frauds are taken care
of properly. A transparent claims management policy in fact can be a very good market
strategy.
We all accept that as long as there has been Insurances, there have been Insurance
frauds. So lets accept the fact that the leakages and frauds cannot be eliminated altogether.
But lets also accept the fact that they can be managed, regulated and kept within a limit.
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Moreover, according to the statistics of the World Health Organization (WHO), in 2011, India
has spent only 3.9 per cent of gross domestic product (GDP) on the healthcare sector which is
the lowest amongst all of the BRICS (Brazil, Russia, India, China, South Africa) member
countries.
Moreover, amongst the BRICS nations, in 2011, Russias out-of-pocket expenses stood
highest at 87.9 per cent closely followed by India (86 per cent), China (78.8 per cent), Brazil
(57.8 per cent), and South Africa (13.8 per cent). However, these expenses in developed
economies of US and UK were comfortably poised at 20.9 per cent and 53.1 per cent
respectively. (Refer: Exhibit-2)
Although the Indian health insurance market has been trailing behind other countries in terms
of penetration but the health insurance segment has been rising from quite some time. It
continues to be one of the most rapidly growing sectors in the Indian insurance industry with
gross premiums for health insurance segment increased by 16% from Rs 13,212 crore in
2011-12 to Rs 15,341 crore in 2012-13. The health insurance premiums have registered a
compounded annual growth rate (CAGR) of 32 per cent for the past eight financial years.
(Refer: Exhibit-1)
The health insurance industry is presently dominated by the following players:
1.
4 public sector entities (National, New India, Oriental, and United India) that together
have 60 per cent market share
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Although there are various definitions of Insurance Fraud but all these are not penalised
under the court of law.
Other instruments of the Indian legal system, such as the Indian Penal Code (IPC) or
Indian Contract Act, also do not offer specific laws so as to define Fraud or Insurance
Fraud. Certain sections of the IPC that are dealing with the issues of fraudulent acts,
forgeries, cheating cases, etc. are sometimes applied to it but none of them are not that
specifically targeted at the insurance fraud and they are also inadequate for the purpose of
acting as applicable to punishment.
In absence of specific laws and harsh punishments, prosecution will rarely be successful and
if successful, the penalty inadequate to deter others. As social health insurance grows the
central and state governments will become one of the largest victims of health insurance
fraud and that may be the catalyst that leads to the development of a comprehensive legal
framework to tackle health insurance fraud.
Misuse by Companies
Health insurance companies cheat customers not giving them their rightful claim or deducting
a heavy amount of money from their deposit. Due to the absence of standard medical
protocols, no oversight of a regulator, the provider induced fraud and abuse forms quite a
large portion of fraudulent claims. It would be quite difficult for a customer to file a
fraudulent claim or fake medical documents without connivance of treating doctor or
hospital. Frauds of such companies also include overcharging the customers, while the
services may be available at a lower cost. They may also deny coverage claims citing
company policies introduced after the health insurance had been taken by the customer.
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Misuse by Customers
Customers sometimes exploit their health insurance policies or the health insurance policies
of their family members for financial gains. Customer frauds may include concealing preexisting disease or chronic ailment, manipulating pre-policy health check-up findings, submit
fake documents to meet policy terms conditions, fake disability claims etc. For example in
Delhi man faked his fathers death in order to claim Rs. 50 lakhs.
Statistics
Insurance companies in USA incur losses over 30 billion USD annually to healthcare
insurance frauds.
In 2007, insurance firms in India lost as much as Rs.15,288 crore, of which life
insurance accounted for `13,148 crore while the general insurance segment lost
Rs.2,140 crore
According to the Federal Bureau of Investigation, healthcare fraud, both private and
public, is estimated to account for between 3 and 10 percent of total healthcare
expenditures, or between $81 billion and $270 billion in 2011.
The Institute of Medicine said in a 2012 report that the U.S. healthcare system wastes
$75 billion a year on fraud.
Deontological Theory
An agent of a company may commit fraud unknowingly if the rules of the company are
flawed. In such a case it becomes the responsibility of the agent to give the customer the
complete details of the health policy which the company offers. If an agent knows that the
policies of the company are not in the best interest of the customer, then he faces an
ethical dilemma. On one hand he misguides a customer by giving him wrong or
incomplete information. On the other hand, he loses a potential customer which can
reduce the revenue of the company.
Moral Relativism
In some case a customer may commit a fraud not for the purpose of financial gains but
because of some crisis he/she is in. In the middle of a crisis it, a person is torn apart
between two decisions. If the victim is forced to commit fraud to take him out of the crisis
it affects his reputation and may further lead him into other crisis. While he may not
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resort to fraud but at the same time may be forced to bear the brunt of the crisis he is
already in. Hence it becomes a case of moral relativism where a right thing is right from
one perspective and wrong from some other perspective and vice versa.
Moral Hazard
Moral hazard occurs in cases where the health insurance agents are subjected to take more
risks on behalf of their firms. In these cases, the moral duty lies with the agents since they
take the unnecessary amount of risks due to the fact that the onus finally lies on the
company to which they belong to and not on them.
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EXISTING
INSTRUMENTS
INSURANCE FRAUD
TO
PREVENT
Insurance
Regulatory
Development
Regulations on Fraud:
Authority
HEALTH
(IRDA)
The Authority has taken a number of measures to address the various risks faced by the
insurance companies. The Corporate Governance guidelines mandate insurance companies to
set up a Risk Management Committee to lay down Risk Management Strategy.
The Guidelines mandate insurance companies to put in place, as part of their corporate
governance structure, fraud detection and mitigation measures and submit periodic reports to
IRDA.
The Anti-Fraud Policy dictated by IRDA requires all insurance companies to set up fraud
monitoring departments, assess high risk areas of fraud, establish procedures to co-ordinate
with law enforcement agencies, formulate frameworks for transparency, procedures to carry
out due diligence on personnel appointments along with a strong whistle blower policy.
IRDA has launched a user friendly and menu driven portal www.policyholder.gov.in which
helps policy holders in redressing grievances, making complaints and buying insurance
policies.
IRDA has initiated the development of a platform called Electronic Transaction
Administration and Settlement system (ETASS) to administer settlement of insurance, coinsurance and re-insurance effectively.
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PROPOSED SOLUTIONS
A particular law addressing health insurance fraud is conspicuous by its absence in Indian
Legislation. We are of the view that government of India should pass a specific legislation
addressing the intricacies and loopholes that are observed in Indian Health Insurance Sector.
General sections in IPC as mentioned above benchmark frauds committed in health insurance
sector vis--vis frauds committed in other sectors.
Any health insurance deal consists of 3 stakeholders: the insurance company, the agent and
the insurant. If the fraud has been committed by the insurance company or agent it could have
a huge impact on the life of the policy holder and hence the punitive penalties should be
higher in case of fraud.
Legislation should include clear policies about risk identification, risk abatement and
settlement guidelines.
In accordance with the legislations effective in Western countries, India should also include
provisions for Claw-back procedures which ensure that the enable an insurer to recover
payments, if fraud is proven.
Insurance companies can deploy robust technology and data analytics processes for detecting
outlier behaviour or for predictive modelling. These function as a kind of early warning
system for detecting fraud. The solutions offered can work in conjunction with existing
practices to create a robust framework for early detection / prevention of fraud.
Whistleblower policy at company level can help motivate individuals to alert an insurer about
individual cases of fraud or systematic fraud. This can be a very attractive mechanism
through which the general population can be engaged in the fight against fraud. In addition
this is a mechanism for disgruntled co-conspirators to exit a risky situation whilst claiming
credit for stopping it.
A structured training program along with mandatory examination, as well as continuing
education requirements should be developed for fraud investigators. All fraud investigators
must meet a minimum skill set requirement. In addition, there should be a mechanism
whereby a fraud investigator can be assessed and certified for higher skill levels. This would
create a cadre of professional and highly skilled fraud investigators. It may be desirable to
ensure that these investigators are licensed by the IRDA.
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In the year 2009- 2010, the government signed a Memorandum of Understanding with ICICI
Lombard. The company was to enrol 8 lakh artisans across the country in the fourth year of
RGSSBY. ICICI Lombard denied genuine beneficiaries of their insurance claims and made
fake accounts of policy holders and charged the government several crores as premium
against fake enrolments. Of the 8 lakh, almost 30,000 were from Rajasthan. Evidence shows
fake enrolments were used to meet the target and at least 20 per cent of the total enrolments
are dubious. Besides this, the company also destroyed cards issued under the scheme. The
fraud was revealed by a whistleblower which was followed by an investigation.
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References
http://www.quackwatch.com/02ConsumerProtection/insfraud.html
http://x-claim.in/controlling-fraud-abuse
http://www.insurancefraud.org/statistics.htm#.VGy_DPmUfpc
http://www.policyholder.gov.in/uploads/CEDocuments/Guidelines%20on%20Standardization
%20in%20Health%20Insurance.pdf
http://www.icf.indianrailways.gov.in/uploads/files/The%20Indian%20Penal%20Code.pdf
http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/countries/models.html
http://planningcommission.nic.in/sectors/health.php?sectors=hea
http://www.cii.in/sectors.aspx?
enc=QSdUUao7W0XCpepCNkEO7m+jHQk2ggcRzaMHfDJr1kjWUn9yjAV1mFZQFFgrW
QfI
http://www.dnaindia.com/health/report-health-insurance-in-india-still-remains-an-untappedmarket-1891509
http://www.cognizant.com/InsightsWhitepapers/Healthcare-Insurance-Evolution-in-India-AnOpportunity-to-Expand-Access.pdf
http://www.ficci.com/spdocument/20185/Health_Insurance_Fraud.pdf
https://www.insuranceinstituteofindia.com/c/document_library/get_file?uuid=e4632c21da80-494c-9264-395283e3e4c0&groupId=16940
http://indiatoday.intoday.in/story/frauds-blow-a-hole-in-insurance-firms/1/176477.html
http://www.insureatclick.com/insurance-news-article.aspx?newsid=605
http://dnasyndication.com/dna/top_news/dna_english_news_and_features/icici_lombard_che
ated_govt_of_crores_of_rupees/dnmum248733
http://www.dnaindia.com/money/report-dna-investigation-icici-lombard-cheated-govt-ofcrores-of-rupees-1709315
http://www.niapune.com/pdfs/Research/MANAGEMENT%20OF%20LEAKAGES.pdf
http://www.cognizant.com/InsightsWhitepapers/Healthcare-Insurance-Evolutionin-India-An-Opportunity-to-Expand-Access.pdf
http://en.wikipedia.org/wiki/Health_insurance
http://caribbean.scielo.org/scielo.php?script=sci_arttext&pid=S004331442011000400023
http://www.issuesinmedicalethics.org/index.php/ijme/article/view/134/997
http://www.issuesinmedicalethics.org/index.php/ijme/article/view/537/1400
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http://bobmaconbusiness.com/?p=1618
http://en.wikipedia.org/wiki/Health_insurance
http://en.wikipedia.org/wiki/Philosophy_of_healthcare
http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/countries/models.ht
ml
http://planningcommission.nic.in/sectors/health.php?sectors=hea
http://www.cii.in/sectors.aspx?
enc=QSdUUao7W0XCpepCNkEO7m+jHQk2ggcRzaMHfDJr1kjWUn9yjAV1mFZQFFg
rWQfI
http://www.dnaindia.com/health/report-health-insurance-in-india-still-remains-anuntapped-market-1891509
https://www.dnb.co.in/bfsi2012/insurance.asp