Financial crime on rise in life insurance sector: Report

Financial crime in the life insurance sector is on the rise, even as the insurance industry is in a growth phase, according to a report.
"Rising transactions with third parties, data privacy concerns and gaps in operational processes have augmented financial crime risks in the life insurance sector," an EY Fraud Investigation and Dispute Services' report, 'Strengthening the life insurance industry in India by mitigating financial risks' said.
The findings have been derived from responses of over 100 individuals, representing a majority of the public and private life insurance companies in India.
According to the report, 56 per cent of the life insurers said there is an increase in frauds of up to 30 per cent over the last two years, while 7 per cent opined that there are up to 50 per cent growth in the same.

Meanwhile, one in three life insurers said their organisations did not have fully established whistle-blowing mechanisms, enhanced third-party due diligence processes, or robust fraud-response procedures.
"The Indian life insurance industry is growing as a result of strong domestic demand, led by a young population with high disposable incomes. To secure and maintain this momentum, life insurers will have to invest in technology enablers, enhance data privacy and implement stricter corporate governance mechanisms to battle financial crime risks," EY partner and head - India and emerging markets, fraud investigation and dispute services, Arpinder Singh said.
The sector has witnessed unprecedented developments in the past few years, amidst changing regulatory reforms and the evolving economic landscape, EY Global Insurance Emerging Markets Leader, partner and leader - financial services advisory Rohan Sachdev said.

"With rising financial crime, life insurers in India would be expected to create a robust anti-fraud ecosystem that will proactively mitigate risks emanating through the life insurance channel," he added.