Health Insurance Frauds in India

What are Health Insurance Frauds?

Health insurance frauds refer to fraudulent claims that manipulate or falsify information or facts to unlawfully gain healthcare benefits from the insurance company. These frauds can take various forms and may be committed either by the insurer or the policyholder. For instance, non-disclosure of pre-existing diseases (PED) during policy purchase is a health insurance fraud.

Types of Health Insurance Frauds in India

Here is a list of different types of health insurance frauds in India:

1. Policyholder's Fraud

   Frauds committed by policyholders are known as policyholder's frauds in health insurance. As consumers have become more aware of the norms, features and rules of the insurance industry, they have started exploiting this knowledge to commit fraudulent activities. Policyholder's fraud can be classified into the following three categories:

   1. Eligibility Fraud

      Eligibility fraud is a type of health insurance fraud where policyholders provide false or misleading information about their age, PEDs, employment status, or information concerning the dependent. Such activities may be unintentional but may result in the denial of claims or even the denial of coverage in future.

      For example, if a person submits a claim for a dependent or relative who is not covered under the policy. Similarly, if an individual hides a PED, like hypertension or diabetes, when buying a policy, it results in claims for conditions that would require serving a waiting period.

   2. Application Fraud

      Under application fraud in health insurance, policyholders knowingly enter forged information in their application form. This misinformation may be related to pre-existing diseases, date of birth, previous claims or other personal details.

      For instance, a person may not provide details related to their pre-existing heart condition to get extensive coverage without serving PED waiting period and avoid paying a higher premium. Similarly, an applicant may provide incorrect date of birth to fall into a lower premium bracket or to qualify for a specific policy.

   3. Claim Fraud

      Claim frauds occur when policyholders submit an illegal claim to obtain health insurance benefits to which they are not entitled. These fraudulent activities often involve intentional deception and may involve other parties.

      For example, a person may claim maternity insurance for a fake pregnancy in association with a doctor to create false documents. Similarly, policyholders may purchase multiple mediclaim policies without informing insurers to enjoy claim settlement from all. 

      In another example of health insurance scams in India, a policyholder and a healthcare provider may team up to inflate medical bills, splitting the extra money. Such collaborations are called fraud rings. Similarly, agents or hospitals might generate higher medical bills related to hospitalization, treatment, etc., to fill their pockets.

2. Deliberate and Opportunity Fraud

   Deliberate fraud is an intentional act of presenting a disease or injury to claim coverage under a health insurance policy. On the other hand, opportunity fraud is created by policyholders by overstressing a genuine claim or providing wrong information related to pre-existing diseases or other health conditions to get the underwriting done in their favour.

   For example, faking an accident and presenting fractures to get money from the insurer is a deliberate fraud. Similarly, not disclosing diabetes as a PED to avoid serving a waiting period and pay a lower premium is an opportunity fraud.

3. External and Internal Fraud

   External fraud is committed by individuals or entities, like policyholders, hospitals, medical service providers, etc., against health insurance companies. On the other hand, internal fraud is committed by the employees of the insurance company, such as managers, executives, agents, etc., against policyholders or the company.

Consequences of Health Insurance Frauds

Committing health insurance fraud, whether intentional or unintentional, is a serious offence. Insurance companies take strict actions to penalise people committing these frauds. In India, the consequences of health insurance fraud are as follows:

• Policy Cancellation: If the fraud is considered severe, the health insurance policy may be cancelled or terminated, leaving the insured without any medical coverage.
• Claim Rejection: Fraudulent actions can result in the outright rejection of the health insurance claim. 
• Increased Financial Liability: In cases of claim rejection, policyholders may be required to cover the entire cost of medical treatments from their own pockets.
• Challenges in Policy Renewal: A history of fraudulent activity can create obstacles when attempting to renew an existing medical insurance policy. This might leave policyholders uninsured in the future.
• Loss of Access to Quality Treatment at Top Hospitals: Getting flagged for health insurance fraud can lead to difficulties in accessing quality healthcare services at top hospitals.
• No Access to Cashless Treatments: With a history of health insurance fraud, the insured may not be able to avail cashless treatment across India in case their mediclaim policy is cancelled.

How to Detect Health Insurance Frauds?

Check out a few common indicators of health insurance fraud:

• Claims made soon after buying a health insurance policy
• Doubtful documents suggesting forgery
• Policyholders aggressively pushing for a quick settlement of claim
• Policyholders willing to accept a small settlement instead of the full reimbursement
• Claim raised for an invisible injury
• Serious lapses in underwriting at the time of processing a claim
• Accidents with no witnesses and not promptly reported