Life Insurers To Crack Down On Fraud Claims

The Indian life insurance industry has decided to crack the whip on fraudulent claimants. The idea is to share information and data among the insurance players to bring down the number of fraudulent claims and declined lives that negatively impact the performance of companies. Declined lives are the proposals that have been rejected by one company.

With the privatisation of the life insurance industry, the new players are keen to track down the source of losses early, especially when there are instances of some cities in northern India having more lives covered than the actual number of residents of the city.

 

Talks are on with the Credit Information Bureau India Ltd to possibly act as the agency for data-sharing. The Credit Information Bureau -- a joint venture between State Bank of India, Housing Development Finance Corporation Ltd, Dun and Bradstreet Information Services India Ltd and Trans Union International Inc -- though incorporated for sharing information on bank loan defaulters has failed to take off. This is because of a secrecy clause in the Banking Regulation Act 1949, which does not permit banks to share information about borrowers between themselves.

The industry is looking at a separate profit centre that will act as the agency for assimilation and distribution of information at a price. This will be the first step in self-regulation of the industry.

The life insurance council which met the Insurance Regulatory and Development Authority last week, discussed various issues including the setting up of a self-regulatory organisation.

A three-member committee -- comprising A Ramamurthy (acting chairman of Life Insurance Corporation of India), Shikha Sharma (managing director, ICICI Prudential Life Insurance) and Shivaji Dam (CEO, OM Kotak Mahindra Life Insurance) -- has been set up by the life insurance council to identify what kind of data the industry can share.

"We will start with non-aggressive, non-competitive data-sharing and then take it forward. We will look into the kind of information that can be legally shared and what the industry would be comfortable with," said a senior insurance official. Unlike in the banking sector, there is no secrecy clause under the IRDA Act that bars the sharing of information by insurance companies.

In the US, Medical Information Bureau and Trans Union International are into assimilation of data for the purpose of information sharing among insurance companies. Insurance companies overseas have some control on the claims ratio as data is shared on fraudulent claims.