What Are The Common Insurance Scams? How To Avoid Them?

To protect yourself, it is important to understand the concept of an insurance scam which involves deceptive practices in the insurance industry. This includes fraudulent activities by policyholders and insurance companies in areas as diverse as health and auto insurance. An insurance scam is any type of fraud aimed at manipulating the insurance policy. This occurs when the claimant seeks benefits to which he or she is not entitled or when the insurer knowingly denies reasonable coverage. Especially, post-Covid the instances of insurance scams have risen, due to social insecurities. The main types of scams are intentional, monetary gain, pretences, and illegality. 

There are two main types of insurance fraud: hard and soft. Aggravated fraud requires intentional loss, such as theft or arson, to claim insurance benefits. However, in soft fraud, policyholders increase the likelihood of claims. Individuals from various backgrounds carry out these fraudulent activities and raise serious concerns.

Types Of Insurance Scams: 

Identity Theft: Identity scam has a significant impact on the healthcare and auto insurance industries. In this scheme, thieves use the victim’s information to buy insurance policies or make fraudulent claims in the victim’s name. These criminals can file false claims using stolen documents for medical treatment or accidents they never encountered. They can also obtain insurance to prevent them from being eligible for stolen credentials.

To avoid identity theft scams, protect personal details like Aadhaar numbers and financial records, and be careful about sharing online. Check bank statements regularly and use unique strong passwords for online accounts. Watch out for suspicious email links and shred important documents before removing them. They raise awareness about the scams and tactics common fraudsters use. Only share personal information with trusted organizations and consider investing in credit reports. Be on the lookout for unsolicited offers or requests for personal information, as these offers greatly reduce your risk of becoming a victim of identity fraud. 

Fake Promises: “If the policyholder is told that everything is covered under the insurance policy, beware, that is not true. All insurance policies have some or the other exclusions. Thus, it is recommended that customers make sure that they cross-check the product features and benefits on the company website or brochure before buying the insurance plan,” Tarun Mathur, Chief Business Officer (CBO), general insurance, Policybazaar.com said. 

Manipulative Calculations: Customers must ask for company standard illustrations, as handwritten calculations can be manipulative. Remember to carry out the calculations on the insurance company’s website or any other company’s standard illustration. 

Do Not Rely On Unverified Sources Of Information: “If the customers feel that they are misled or are not provided satisfactory clarity on their doubts against the circumstances around claim settlement, like what type of claim is payable, and what is not. Alternatively, if someone deceives them about policy tenure, premium amount, or the facts around policy surrender, grace period, etc. Customers can avoid such confusion by crosschecking all the details on the website or aggregator’s platform as digitization has transferred control into their hands,” Mathur added. 

Seek The Agent’s Identity Proof: While dealing with insurance agents, it is important to ask about their identity as per the insurance regulatory development authority (Irda) rules. Agents must receive training and obtain appropriate credentials. When approached by an agent, ask for their ID, take notes, and verify it with the insurance company’s customer service. This precautionary step protects against insurance scams.

Refrain From Paying In Cash: Avoid paying insurance agents in cash. Always verify payment information by calling customer service to confirm the right customer. This prevents money from being inadvertently transferred to an agent who could hide it under a similar name, reducing the risk of an insurance scam being uncovered. Make sure the information on the check is from the insurance company there, and not at an intermediary agency if the agent represents an individual even a corporation.

Do Not Share Your Policy Details: Avoid sharing your policy details with third parties you don’t know to prevent insurance scams. Fraudsters can pose as insurance agents, employee benefits agents, or office representatives to obtain your policy information. If someone calls you asking about your insurance policy and if you have any complaints, be careful and remain extra vigilant.

Buy Insurance Policies Online: To avoid falling victim to insurance scams it's advisable to purchase insurance plans by going through an agent. By doing you skip the middlemen. Guarantee a safe and transparent transaction. When it comes to making payments, be sure to protect your credit card details and stick to the insurers' website, known for its SSL-encrypted payment portal. 

Report Loss Of Policy Document Immediately: If you lose your insurance policies, it is important to act quickly to prevent scams. If necessary, store your documents in a safe deposit box and keep a copy. Report the loss to an insurance fraud investigator immediately. Generally, you have to file a police report (FIR), place a newspaper advertisement, and get the insurance company to issue a quote on a postage stamp.

Be Sure To Document Your Plans: When buying insurance online, make sure you fill out your insurance forms accurately to prevent insurance fraud. When the agent fills out the forms for you, review the details carefully, including and excluding them, and watch out for typos, missing information, or factual errors. Always read your policies carefully before signing them.

Use Caution When Using Internet Kiosks Or Public Networks For Transactions: 

Be careful when transacting through online stores or public networks to avoid falling victim to electronic insurance scams, which are becoming increasingly common as fraudsters can use Wi-Fi networks to steal personal data. Be vigilant when accessing or processing personal information through these websites. Always remember to log off from a public computer after use and use an encrypted connection to make online payments.

Beware Of Ghost Policies: Ghost policies are common in the life and health insurance industry. They involve brokers or agents selling fake plans to customers, and pocketing invoices without issuing invoices as promised. These agents may take out phantom insurance for personal gain or to maintain their company. In some cases, ineligible individuals, such as those with pre-existing medical conditions, may also have received these assessment programs.