Life insurers tighten e-policy underwriting

Insurers to carry out elaborate checks to eliminate potentially fraudulent persons at the entry level itself

Online insurance, which has slowly become one of the fastest growing channels for life insurers, has also led to companies tightening underwriting policies around these products. With a rise in fraudulent claims, life insurance companies now ensure that the process weeds out any potentially fraudulent persons at the entry-stage itself.

Karthik Raman, chief marketing officer and head of products & strategy at IDBI Federal Life Insurance, said that being a late entrant, the company has had the advantage of learning from industry and reinsurer experience.

“We do not accept business from debarred geographical locations, which are fraud-prone. We continue to follow stringent underwriting processes. Ours is a 100 per cent medically underwritten product. Plus, we have additional checks in terms of location, occupation and educational qualification,” said Raman.

In the past, certain pockets in north India and south India were identified as locations where fraud was most common. Since online policy purchase was simpler than the process offline, there have been several instances of people buying high-value covers without any intention to pay future premiums.

Their sole objective is to get the claim passed within lapse of two to three years of buying the policy.

Following this, life insurers have been exercising more caution. For instance, Max Life Insurance has 100 per cent medical underwriting for all online policies.

Sharing of data of regular fraudsters is also done so that there is a common information flow to prevent any future policy sales to such persons and also to check whether they have changed the geography of their operations.

“Since most of these people operate as a gang with the help of doctors and insurance agents who have left the system, they know how to manipulate the purchase process. While we cannot put a blanket ban on some pockets of Andhra Pradesh and Uttar Pradesh, where there has been a high intensity of fraud claims, we either refuse to underwrite or suggest them to buy offline policies so that we can verify their details over a long period,” said the head of underwriting at a mid-size private life insurer.

Section 45 of the Insurance Act saying no claims can be rejected after three years, even if it includes material suppression of facts. This means, even if a fraud has been detected after three years, the claim will have to be paid.
CHECKING FRAUDS

PROBLEM:

• Since online policy purchase was simpler than the process offline, there have been several instances of people buying high-value covers without any intention to pay future premium
   
• Their sole objective is to get the claim passed within  two to three years of buying the policy

SOLUTION:

• Certain locations across the country identified to check fraud
   
• Sharing of data of regular fraudsters is being done so that there is a common information flow  to prevent any  future policy sales to such persons