A presentation on various frauds affecting the insurance industry along with cases emphasizing the need for forensic audit / accounting to uncover them and reduce losses

1. Frauds in Insurance Sector
A Presentation by
GROUP - II
Pune January 2014 Batch of Certificate Course on
Forensic Accounting and Fraud Detection
1

2. Introduction

Fraud in Insurance may take place in various
stages like:
◦
◦
◦
◦
◦
Fake Insurance Policies
Fake Customers
Fake Declarations
Fake Claims
Fake Claimants
2

3. Classification of Frauds

Insurance Frauds are broadly classified as:
◦ Hard Frauds: (Fake Auto Theft, Fake Fire thefts, or
collusion frauds etc. – Here the claim itself is
questionable).
◦ Soft Frauds: (Opportunist frauds – here claim amount
is exaggerated on an otherwise legitimate claim).
3

4. Frauds in Life Insurance

Issue
◦ Fake customers
◦ Misrepresentation of Facts: Age, Health

Claims
◦ Faking death claims
◦ Fake claimants
4

5. Frauds in Medical Insurance

Issue
◦ Misrepresentation of Facts: Age, Health

Claims
◦ Fake injuries / illness
◦ Exaggerated injuries / illness
◦ Inflated medical / hospitalization bills
5

6. Frauds in Personal Accident Insurance



Fake Customer
Fake Accident / Disability / Death
Fake Claimant
6

7. Frauds in Motor Insurance

Issue
◦ Fake / forged Documents
◦ Misrepresentation of Facts

Claims
◦
◦
◦
◦
Fake accidents / repair bills
Inflated repair bills
Tampered repair bills
Fake third-party claimant
7

8. Frauds in Marine Insurance



Fake shipment
Misrepresentation of value, quantity, quality
Fake in-transit theft
8

9. Frauds in Fire & Burglary Insurance



Fake stock / asset
Misrepresentation of value, quantity, quality
Fake fire / burglary claims
9

10. Frauds in Asset / Machinery Insurance



Fake assets
Misrepresentation of value, quantity, quality
Fake breakdown / damage claims
10

11. Red Flags






Abnormal delay in submitting claim / document
Absence / discrepancy in key documentary evidence
Abnormal urgency to settle claim
Abnormally large claim vs. usual business
Convenient Alibi
Recent policy / increase in Sum Assured
11

12. Situations involving Insurance Fraud

Mr. 420, a teacher, takes a Personal Accident policy of Rs.
42 Lacs on his 42nd birthday

M/s. Toliyawalla & Safediwalla’s export consignment was
rejected by their Bangkok customer

F Company takes a Group Medical / Health Insurance
policy on its 1200 employees
12

13. Distrust the obvious and apply professional skepticism
Presented By Group II Members
Roll No. Name
CA Kulkarni Prakash Purushottam
CA Gupta Satya Prakash
CA Parakh Vinod Kumar
CA Doshi Sunny Rajendra
CA Newaskar Ranjit Raghunath
Member No.
Thank You
13