Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care and health system expenses, among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement.
The Indian Insurance Act does not have a definition for ‘insurance fraud’. Neither the Indian Penal Code (IPC) nor the Indian Contract Act have any specific laws pertaining to insurance fraud. The sections of IPC that deal with fraudulent acts or forgery are applied, but with limited success and hence, they fail to act as deterrents.
Recently, the Insurance Regulatory and Development Authority (IRDA) quoted International Association of Insurance Supervisors’ (IAIS) definition, “an act or omission intended to gain dishonest or unlawful advantage for a party committing the fraud or for other related parties."
The Federation of Indian Chambers of Commerce & Industry define insurance fraud as, “The act of making a statement known to be false and used to induce another party to issue a contract or pay a claim.This act must be wilful and deliberate, involve financial gain, done under false pretenses and is illegal.”
The National Healthcare Anti-Fraud Association, USA, defines healthcare fraud as, "The deliberate submittal of false claims to private health insurance plans and/or tax-funded public health insurance programs. Intentional deception or misrepresentation that the individual or entity makes, knowing that the misrepresentation could result in some unauthorized benefit to the individual, or the entity, or to another party."
Types of Fraud
According to IRDA, insurance fraud can be of the following types:
Policyholder Fraud and/or Claims Fraud: A fraud that is committed against the insurer during the purchase and/or execution of a policy. This also includes fraud at the time of making a claim.
Internal Fraud: When a staff member of the insurance company commits a fraud or misappropriation against an insurer.
Intermediary Fraud: When the intermediary commits a fraud against the insurer or the insured
Claims Related Fraud
The most common frauds committed by policyholders include:
Concealing pre-existing condition: Since most individual health policies have a two to three year waiting period for pre-existing conditions/ pre-existing diseases, the policyholder can conceal that fact. The policyholder can do so by manipulating the findings of the pre-policy health check-up.
Fake documents to meet policy term conditions: Most insurance companies prefer insuring young and healthy people. They might not reject an application from an elderly person, but they might charge him/her a higher premium. In this case, people might submit fabricated documents to conceal their age or recurring ailments.
Duplicate bills: The objective of health insurance is to cover the medical expenses incurred during illness or surgery. An insurance policy is not purchased with a view to make profits. Thus, when a person submits forged bills, when no expenses have been incurred, or inflated bills, the action qualifies as fraudulent.
Purchasing multiple policies: It is not illegal for an individual to have multiple health insurance policies. If a person has more than one individual health policies or a group policy and an individual policy, he/she must ensure that all the insurers are aware of the other existing policies. This is to prevent an individual from making multiple claims and ending up making a profit.
Participating in fraud rings: When a consumer makes a fraudulent claim in collusion with other parties, like agents, physicians, providers, that’s known as a fraud ring. The insured might ask the physician to issue false prescriptions against which a claim can be made.
Staged accident: A consumer might stage an accident in order to claim compensation for medical bills and hospital bills.
Fake disability claims.
Due to the growth of social health insurance, the central and state governments are likely to be victims of fraudulent health insurance claims. This might lead to the emergence of a legal framework to tackle such cases.