Motor Insurance Frauds in India: Detection and Control Mechanisms

Abstract

Insurance fraud is constantly raising concerns among insurance companies and regulators, due to huge losses caused to business every year. For every Rs. 100 premium earned by the insurance companies, they would be paying Rs. 213 as claims. Motor insurance which contributes almost one third to the non-life insurance in India is highly affected by fraud. Many insurance companies are showing loss due to high claim ratio in motor sector. The motor insurance market in India is growing at respectable rate, and this provides greater opportunity for insurance companies to tap this growing market. Nonetheless, the insurance companies face greater challenges in terms of reducing claim processing cost, and detection and control of fraud. Hence, the purpose of this paper is to explore the magnitude of the problem and methods to prevent and control fraud in motor insurance. And also study highlights ways to reduce claim processing cost. The paper reveals the scarcity of research of such a topical issue in developing economies such as India and suggests the urgent need to discuss among insurance companies about the effects of insurance fraud on the industry, with a view to tackle the problem. This should also be complimented with the establishment of “Insurance Fraud Bureau” that would promote public awareness campaign on the evil effect of fraud on the economy.

Keywords

• fraud
• claim handlers
• key performance indicators