Insurance frauds and how to deal with them

It's not just the faceless callers who sell you wrong policies, advisors and agents known to you personally can also be the culprits

When something sounds too good to be true, it usually is. As cliched as that sounds, policyholders often fall prey to old tricks in the book that scamsters use time and again to defraud gullible investors. Frauds in the name of insurance have become very common and policyholders need to be alert to avoid being fleeced by unscrupulous agents. With the prevalence of telecommunication in the sales and marketing, face-to-face interaction with agents and sales persons is becoming rare. Also, with the help of technology and articulation skills, it is now easier to fool people.

Frauds in the field of insurance can be divided into two broad categories: those devised by professional fraudsters and by known advisors who inadvertently sell the wrong product or information.

Fraudsters posing as agents or IRDA officials

Narendranath, a resident of Bangalore, received a call from a woman who introduced herself as an LIC (Life Insurance Corporation) official. She briefed him that his father who expired in 2002 has left behind a policy with sum insured Rs 10 lakh. As she accurately mentioned the death year of his father, Narendranath did not doubt the credentials of the caller. He was also told that if he fails to claim this money soon, it would be transferred to the government account, as it was already quite late. He was also asked to send his ID proofs and a cheque of Rs 14,999 in favour of Shree Investment Solutions, as LIC, he was told, is investing a part of the amount in this company.

Smelling a rat, Narendranath decided to enquire with LIC and came to know that it was a fraud.

Many policyholders are getting similar calls from different places. The caller would usually have all the details of your existing policies and other personal information. Such information usually gets leaked as insurance companies outsource data processing to third parties, which sell the data for making money. Once they have won your trust, they would make you invest money in another insurance scheme, and then disappear with that money or by pocketing a fat commission.

What to do

Be alert: Don’t let your defenses down easily. If you receive such calls from unknown callers, ask as many questions as you can. Cross check every detail that they give you about themselves. If possible, give a call to your existing insurer.

Be informed: Knowing a few things would guard you against many such frauds. First, IRDA or any departments of IRDA do not make calls to policyholders directly or do not sell you insurance. This would be true of most professional insurance providers as well.

Do not remain silent: If you have been tricked into investing in one of these spurious schemes, do not remain silent. Immediately lodge a police complaint giving details of the phone number, name of the person, etc.

Advisor frauds

It's not just the 'faceless' callers who sell you wrong policies by promising you big bonuses. Even advisors and agents known to you personally can coax you into buying the wrong insurance products, inadvertently give you wrong information or even mask the correct information.

Sudhir Chandra, who was about to retire in a year, was sold a Unit-Linked Insurance Policy (ULIP) by a colleague's son. The agent sold him a regular premium product by saying that it is a single-premium product. The man is now stuck with a 10-year insurance product that has an annual premium of Rs 25,000, a sum he cannot afford to invest every year. This is a common story playing out almost every day.

There are instances where agents have misplaced cheques of insurers and not kept them informed about it or have even misused the money.

What to do

Read the product brochure: When people known to you approach with such selling propositions, resist the temptation to let familiarity overcome prudence. Do not go blindly by what your agent says; instead, read the documents related to the products carefully.

Consult your children, siblings, parents: Discussion with family would throw up questions that may not be evident at the outset. Use this as a base for setting up a detailed conversation with your agent – an informed approach has a higher likelihood of reading warning signals if any when you talk to your advisor.

Wait for verification calls: When you buy an insurance policy, the insurance company calls you to know if you were aware of the product features and terms and conditions. Do take this call seriously, and if you realise that you have been mis-sold the policy you can cancel it. Insurance companies give 15-day free-look period during which you can cancel your policy without being charged anything.

Lodge a complaint with the insurer: If you think you have been sold a wrong product, lodge a complaint with the insurance company. The company must resolve the issue within 15 days. If that does not happen, you can lodge your complaint with grievance redressal cell of the IRDA. As per the new Insurance (Amendment) Bill, if any agents are inducing policyholders to take policies, or mis-selling any product, a hefty penal charge will be levied upon the company or the agent.

Insurance is one of the non-negotiable financial needs for anyone, but it can turn into a source of stress if one is not diligent enough. Your alertness and financial awareness are key to protecting yourself from financial frauds.

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