Setting A Precedent, New India Assurance Cancels
Health Policies Of People Who Made Bogus Claims
Filing a fraudulent health insurance claim can now land
a policyholder in the police’s crosshairs. The New India Assurance Company Ltd
has cancelled about 30 mediclaim policies in the last six months after an
internal investigation revealed that these policyholders were paid against
bogus claims. The insurer is now considering registering first information
reports against the customers and their colluding agents for forgery and
cheating.
There are also signs that other public sector insurers may follow New India Assurance’s suit and cancel policies instead of merely repudiating false claims. “There is pressure from the finance ministry to emulate the example set by New India Assurance Company,” said an industry insider, “since insurance firms are within their rights to take these steps, which are within the ambit of the law.”
Industry sources said the severe punishment has been necessitated by the adverse claims ratio that the public insurers suffer. The ratio describes when the sum of claims made before an insurance company exceeds its premium revenues. In 2010-11, statistics show, all four public sector insurers paid more claims than they earned premium. New India Assurance’s adverse claims ratio, for instance, was about 102% in 2010-11.
A New India Assurance senior official said, “We have started cancelling policies of holders who breached the company’s trust. A show-cause notice was first issued to them to allow them a fair chance to explain their stand. When they failed to provide a convincing reply, the policies were revoked.” The policyholders’ deception ranged from fraud to misrepresentation or suppression of facts. The official added that more policies will be cancelled in the coming months under the fraud and abuse control measures of the company.
Industry experts said it may be difficult for the penalized policyholders to switch to a different insurer’s plan since “no company, whether private or public, likes to offer services to people with a bad track record”.
A claims investigator said that of all the health claims an insurer receives, between 25% and 30% are manipulated. And of these, about 10% are outright fraudulent. Due to this widespread con, according to one estimate, the industry loses about Rs 500 crore every year. By punishing the tricksters severely now, the insurers are attempting to set a precedent and, thereby, correct the claims ratio. “Our action in the past was limited to repudiating the claim if we suspected foul play,” said the New India Assurance official. “But strong measures are needed now to weed out the people who defraud the industry.”
There are also signs that other public sector insurers may follow New India Assurance’s suit and cancel policies instead of merely repudiating false claims. “There is pressure from the finance ministry to emulate the example set by New India Assurance Company,” said an industry insider, “since insurance firms are within their rights to take these steps, which are within the ambit of the law.”
Industry sources said the severe punishment has been necessitated by the adverse claims ratio that the public insurers suffer. The ratio describes when the sum of claims made before an insurance company exceeds its premium revenues. In 2010-11, statistics show, all four public sector insurers paid more claims than they earned premium. New India Assurance’s adverse claims ratio, for instance, was about 102% in 2010-11.
A New India Assurance senior official said, “We have started cancelling policies of holders who breached the company’s trust. A show-cause notice was first issued to them to allow them a fair chance to explain their stand. When they failed to provide a convincing reply, the policies were revoked.” The policyholders’ deception ranged from fraud to misrepresentation or suppression of facts. The official added that more policies will be cancelled in the coming months under the fraud and abuse control measures of the company.
Industry experts said it may be difficult for the penalized policyholders to switch to a different insurer’s plan since “no company, whether private or public, likes to offer services to people with a bad track record”.
A claims investigator said that of all the health claims an insurer receives, between 25% and 30% are manipulated. And of these, about 10% are outright fraudulent. Due to this widespread con, according to one estimate, the industry loses about Rs 500 crore every year. By punishing the tricksters severely now, the insurers are attempting to set a precedent and, thereby, correct the claims ratio. “Our action in the past was limited to repudiating the claim if we suspected foul play,” said the New India Assurance official. “But strong measures are needed now to weed out the people who defraud the industry.”
ROUTE TO REDRESS
A policyholder dissatisfied with an insurer’s decision on his or her claim can make a second representation to the company
In case the insurer’s second call is again not to the policyholder’s satisfaction, he or she can approach the Insurance Ombudsman of the jurisdiction under which the insurer’s office falls
The plaint to the Ombudsman has to be given in writing by the aggrieved policyholder or by his or her legal heirs within one year of the insurer rejecting the second plea
The Ombudsman cannot be moved if the issue is pending before any court, consumer forum or arbitrator
If the policyholder is not satisfied with the award of the Ombudsman, he or she can seek redress from consumer forums or courts of law
A policyholder dissatisfied with an insurer’s decision on his or her claim can make a second representation to the company
In case the insurer’s second call is again not to the policyholder’s satisfaction, he or she can approach the Insurance Ombudsman of the jurisdiction under which the insurer’s office falls
The plaint to the Ombudsman has to be given in writing by the aggrieved policyholder or by his or her legal heirs within one year of the insurer rejecting the second plea
The Ombudsman cannot be moved if the issue is pending before any court, consumer forum or arbitrator
If the policyholder is not satisfied with the award of the Ombudsman, he or she can seek redress from consumer forums or courts of law
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