This week for the Community Wise, we bring you to about Insurance Samadhan, an online platform, working towards meeting the unmet needs of mistreated insurance policy holders.
Shikha Duggal
Insurance companies have experienced a rise in the instances of frauds within the life and health insurance categories, according to Deloitte’s Insurance Fraud Survey 2023.
To avoid this marginal increase in fraud — an online platform named “Insurance Samadhan” has been introduced to stop newer ways of perpetuating frauds.
The co-founder, Shilpa Arora shares, “Due to a provision under section 45, insurance companies tend to reject claims in the first three years due to non-disclosure or any error in filing the proposal form and the onus remains on the nominees to justify why the claim should be paid.
Then, in loan-linked group insurance where the borrower is only signing the form without comprehending and analyzing the relevance of the proposal form and declarations. We have also witnessed delinquencies in payments of claims where sometimes non-mandatory requirements are raised, and the customer feels stuck. And, then policy holders are also making claims against the policies which are mis-sold to them primarily by promising a loan or return of money in their lapsed policies.”
According to the survey, digitisation has acted as a key catalyst for growth in the insurance sector. “Such illicit activities are on the rise as most people do not buy insurance policies for risk management but for the sake of lucrative incentives related to the policies such as loans,bonuses, or commissions which most of the time are false promises.
It is said that insurance is always sold, not bought! Most people across the country buy insurance policies due to greed for gains which eventually leads to the policies being mis-sold by fraudulent representatives. It is noteworthy that due to a lack of financial awareness, policy holders are often allured by genuine insurance brokers which show them higher returns by showing sum assured and bonuses.”
First-year commission on insurance is very high due to which fraud representatives use it as the best bait to attract potential policy buyers. Such ingenuine insurance brokers encash the fact that the public would trust them because money is going to insurance carriers ensuring them a net margin of 40%!
She continued, “Life Insurance Corporation is indeed the most prominent insurance carrier in India which serves 68% of the domestic market. Notably, LIC does not incorporate any alternate channels for distribution! I would like to highlight that the platform does not sell any kind of insurance policy. Instead, it is an insurance redressal platform that operates on the customers’ end and resolves the grievances which the policy holders may face after the sales of the insurance policies such as service issues, claim management, filing, claim rejection due to mis-selling of the insurance policies or frauds.”
She also shares a case in point, “One of the most crucial examples of financial emergencies is related to loan-related credit policies. The family may face a financial emergency in almost all loan-related credit policy scenarios where a key lender expires! Insurance policy is sold with the agreement that loan liability will be covered in case of demise but if the claim is not paid, the family has to pay EMI or surrender the mortgaged property.
In most cases, the form is not filled correctly, and the family faces a critical situation due to a lack of awareness. We have also experienced that policies covering only critical ailment and accidental demise are sold as credit shields. Covid deaths were not covered under such policies and hence many widows unfortunately lost their property or had to bear the additional responsibility of paying EMI despite having insurance on the loan.”
Globally, insurance companies have acknowledged that fraudulent activities lead to both financial and reputational loss. Mitigating fraud needs strategic intervention and an appropriate tone at the top! The insurance sector is at the cusp of a digital revolution, and like any other sector, it is compelled to re-invent itself to introduce faster business operations, customer acquisition, and experience with the power of technology —
explained the survey. “The factors like lack of knowledge and inadequate comprehension of the insurance sector can be attributed towards the underestimation of the policy’s significance by educated consumers. The public often raises the question of why a specific company would pay the claim amount if they do not mint profit from the same.
However, potential customers need to understand that insurance works on the pool system where the insurance carrier works as the manager of funds. The pool of insured pays the premium so that the insurance claims of few can be processed when it is required as per the policy terms and conditions. Insurance is a business of large numbers and is the ideology that is nurtured by numerous people in the country.”
Technology is the backbone of the insurance industry which deals with large numbers of policy claims. The advanced technologies of artificial intelligence, machine learning, blockchain, internet of things, data analysis, telematics, predictive analysis have redefined the insurtech ecosystem in India.
The new-age technology has assisted insurance carriers in gathering vital information about the customers’ financial background which leads to the formation of customized policies that diligently cater for the insurance needs of the potential policyholders. The disruptive technology ensures procedural accuracy and enhances the brand value by facilitating magnificent customer service, efficient claims management and swift grievance resolutions. While the same technology is misused and is becoming a lurking risk.
