The Irdai has mandated that insurers ought to frequently run fraud-focused programs to tell policyholders and the general public about fraud risks and ways to prevent them. It has also been said that training for personnel and intermediaries is essential to prevent the incidence of fraud. This and other guidelines have been laid down in the Insurance Fraud Monitoring Framework Guidelines, 2024. These guidelines have been issued to provide a regulatory framework on measures to be taken by insurers and distribution channels to cope with and tackle dangers emanating from fraud.
“Given the substantial change in the nature and intensity of fraud over the years since the framework has been reviewed and a comprehensive insurance fraud monitoring framework guidelines for the insurance sector is drafted. Drawing insights from practices followed by other financial sector regulators and international best practices in this domain, the draft provides an enhanced framework that includes advanced measures for fraud detection, efficient fraud handling, robust fraud prevention, and other relevant aspects,” says the exposure draft document.
Here, we take a look at measures that distribution channels have been asked to take to prevent the occurrence of fraud.
Insurance distribution channels function as an intermediary between insurers and policyholders. These channels cope with product distribution, consumer relationships, and policyholder wishes, making them important in coping with fraud dangers.
Duties Of Insurance Intermediaries
Insurance intermediaries have several duties when it comes to the prevention of fraud. This consists of knowing the sorts of fraud and how they could have an effect on policyholders. To lessen their vulnerability, intermediaries need to put in place internal rules, tactics, and controls to discourage, detect, and report fraud.
When intermediaries suspect fraud that would affect the insurer, they have to tell the insurer right away. The management of each intermediary business enterprise is responsible for making sure those fraud control procedures are in place and running successfully.
Other Distribution Channels
Distribution channels that are not formal intermediaries still need to observe the insurer's anti-fraud policies. They also need to tell insurers about any suspected fraud that could affect them. This enables the creation of a crew approach to stopping fraud throughout all distribution channels.
Reporting Requirements
Insurers should report fraud incidents to regulation enforcement and applicable corporations as required by law. If fraud involves distribution channels registered with the Insurance Regulatory and Development Authority of India (Irdai), insurers have to quickly document these incidents to the Irdai.
