Life underwriters form repository to fight fraud
The new rules in the life insurance industry have made it impossible for an insurer to reject a claim after three years. For you, this is good as your insurer can’t deny your beneficiary insurance money if a claim is made after three years of buying a policy. Within three years, the insurer can investigate the claim and repudiate on grounds of fraud or misrepresentation. The rules state that life insurance companies must compulsorily pay all claims made three years after the date of commencement of a policy. No exceptions. So, if there is fraud, mis-statement or non-disclosure by the policyholder, the insurer has three years to discover and act on it. After that, the policy cannot be called into question.
This has insurers worried, especially in an environment where fraud is on the rise and policies are bought with an intention to commit fraud. “In the last couple of years, fraud by both distributors and customers has gained volume, size and complexity. Policies are bought on fake names and on behalf of deceased persons; we have experienced increased fraud in certain geographies like Uttar Pradesh, Gujarat and Andhra Pradesh,” said Khushru Sidhwa, executive vice-president, audit and risk management, HDFC Standard Life Insurance Co. Ltd. In fact, according to some estimates, insurers lose about 6% of revenue annually due to fraud.
To battle fraud, life insurance companies with the help of the Life Insurance Council, industry body representing life insurers in India, have signed up with Experian India, which provides business data and analytical tools, to build a data repository to create a fraud monitoring framework.
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