As we enter the International Fraud Awareness Week 2024, it's an opportune moment to reflect on the critical issue of insurance fraud along with the collective efforts required to combat it. The general insurance sector is intricately linked to most of the industries, such as infrastructure, automotive, healthcare, agriculture, and society as a whole. It is pivotal in strengthening the economy by providing essential financial security to individuals and businesses. Understanding why people hesitate to buy insurance despite its advantages is crucial. Why does the industry, despite a combined ratio exceeding 100%—indicating it pays out more in claims than the premium it earns—still face scepticism about its willingness to pay claims?
One primary reason for this paradox is the prevalence of insurance fraud, costing the Indian insurance industry crores of rupees annually. Fraudulent claims push claim ratios higher, resulting in increased premium costs and a trust deficit. Such deceitful practices stifle industry growth and adversely affect society.
However, fraud undermines this trust and hampers insurers' ability to handle genuine claims efficiently. With past experiences of fraud, insurance companies have developed systems to track and mitigate fraudulent activities. Nevertheless, fraud consumes valuable operational resources, such as workforce and financial reserves