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Everything You Should Know About Fraudulent Health Insurance Claims

Updated On Dec 04, 2020

Talking about the health insurance frauds in the insurance sector, the Indian Insurance Act doesn’t acquire any clear definition for 'insurance fraud'. Also, neither the Indian Contract Act nor the Indian Penal Code (IPC) possesses any particular laws in reference to the fraudulent activities in the insurance industry. Although, in some cases, the sections of IPC are applied to deal with the false acts or forgery, yet they manage to gain mere a limited achievement and thus, considered a failed deterrent. 

What is a fraud? 
As of late, the Insurance Regulatory and Development Authority (IRDA) cited the International Association of Insurance Supervisors' (IAIS) definition, "a demonstration or omission proposed to achieve unlawful benefits for a client or party indulged in fraud or for other related parties." In addition to this, some other organizations have defined fraud in a different manner. The Federation of Indian Chambers of Commerce and Industry characterizes fraud in the insurance sector as, "The process of creating a false statement with the intent to persuade another party, insurance provider here, to issue an agreement or pay a claim. This procedure must be willful and intentional, include monetary profit and done under wrong intentions and is unlawful." 

Last, but not the least, The National Healthcare Anti-Fraud Association, USA, has defined the health care related frauds as, "The intentional submittal of false claims to private medical coverage policies as well as tax-funded general health care coverage programs. Some intended frauds made by an entity or an individual, realizing that the distortion could result in some unapproved advantage to the individual, or to another party or the entity.  

Medical coverage industry or health insurance sector is rising every day, with more and more people understanding its value and purchasing it. But, here comes a catch. The awareness not only enhances the profits but also the challenges. With an increased number of individuals leaning towards having the insurance policies, some are there who are investing here with the intention of committing frauds by making false claims and earn.  The false medical coverage claim is actually a claim made to cover or distort data which is intended to give health insurance-related benefits. Frauds can be of numerous sorts and committed by both insurance companies as well as policyholders. Here are a few types of frauds – 
Opportunity and Deliberate Fraud – It is an intentional presentation of showing mishap or misfortune, which is secured under the health insurance plan. The opportunity or deliberate fraud or misrepresentation is made by the policyholders by over focusing on an authentic claim or giving incorrect data identified with the prior ailments and so on, so as to complete the claim procedure in their favour. 

Internal and External Fraud – The external misrepresentation or fraud is asserted by either a person or entities like policyholders, recipients, vendors or medical service providers against an organization. On the other hand, the internal misrepresentation is implemented against a policyholder or its organization by different representatives like a chief, official or operators. 

Policyholder's Fraud – In the current scenario, the customers have turned out to be more aware of the regulations, highlights and principles of the insurance plans. With this, their involvement in fraud cases increases, as due to the knowledge they tend to find out the loopholes of the insurance plans. Generally, policyholder frauds are divided into 3 classifications, which comprise Claim Fraud, Eligibility Fraud and Application Fraud. These types of frauds are briefed below:

Claim Fraud – At the point when an individual enters a fraudulent health insurance claim for whose advantage he or she isn't entitled to, that sort of fraud is known as claim fraud.  An individual can also request a bogus claim under the maternity covers, but, in such purposeful claims, the insurance providing firms and policyholders are believed to face the loss by profiting the doctor. These sorts of groups are otherwise called fraud rings. In another case of claim fraud,  a policyholder can even make insurance speculation, wherein, he buys a few medical coverage plans without letting the insurance agencies know about this and gets benefitted through claim settlement from all.  In addition, the operators or emergency clinics generate higher medical bills in respect of hospitalization, treatment, etc, to earn a huge amount out of claims.

Eligibility Fraud - This type of fraud basically incorporates the distortion of the data provided pertaining to the employment status of the insured individual, pre-existing illness and data related to dependent members. Here, the recipient is paid with the benefits unlawfully, for instance, if an individual submits a claim in reference to the relative or dependent, who isn't secured under the health insurance. Another case under such sorts of frauds can be understood as when a part-time worker isn't secured under some insurance policy given by the organization to full-time representatives only, but former tries to produce the false records with the help of an HR representative to seek the benefits being a full-time worker. 

Application Fraud - It is commonly committed in the medical insurance industry where the customer, purposely enters false data in its application pertaining to the pre-existing ailments, crucial dates or claims. For example, sometimes a policyholder probably won't enter the information identified with his previous illness or critical medical conditions so as to get broad insurance coverage and have issues in filing the free claims. Indeed, on occasions, the businessmen too, twist the joining date of the workers to seek approvals from the insurance agency.

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