Insurance fraud decoded: How a woman faked death twice to claim Rs 1.1 cr

Oh, to what extent would people not go for money! A 55-year-old woman from Mumbai's Bhayander allegedly faked her death twice in two years. But why, you may ask? To claim insurance worth Rs 1.1 crore, of which Rs 70 lakh had already been paid out. The family managed to deceive four insurance companies.

How did she carry out the fraud?

According to the police FIR, Kanchan Pai, alias Pavitra, bought insurance policies from Max Life, Bharti AXA, HDFC, and Future Generali, totalling approximately Rs 1.1 crore. After purchasing the policies, the family declared Kanchan dead and submitted fake death and cremation certificates to claim the insurance money.

Between 2021 and 2023, the insurance companies disbursed Rs 70 lakh based on these fraudulent claims. The scam came to light when one of the insurers noticed discrepancies while processing an additional claim of Rs 41 lakh, prompting an internal investigation. The first reported fake death occurred on October 11, 2021, with Kanchan’s son, Dhanraj, submitting documents that led to a payout of Rs 20.4 lakh after verification. Another insurer settled a claim of Rs 25 lakh for the same ‘death’.

On October 20, 2023, another death was recorded under the name Pavitra, with Rohit, the husband, receiving Rs 24.2 lakh. However, an audit in January 2024 raised suspicions due to inconsistencies like the same address but different names of the insured on Aadhaar and PAN cards, prompting insurers to exchange information and uncover the fraud. Realising their scheme was exposed, the family absconded.

In another case, last year in January, a man with insurance policies worth Rs 7.4 crore faked his death in a car accident. The man had multiple policies and staged a fatal accident to claim the money, highlighting the lengths to which individuals will go for financial gain.

Vineet Mehta, Partner at EY Forensic and Integrity Services, told Business Standard, “The absence of a reliable identification system and the lack of biometric authentication during hospital admissions have facilitated such fraudulent activities."

What is insurance fraud?

Insurance fraud is when a company or consumer knowingly deceives an insurance company for personal gain. It can happen during the buying, using, selling, or underwriting processes of handling insurance claims.

What is life insurance fraud?

Life insurance fraud occurs when an insured person or an insurance company alters or provides false information with the goal of financial gain. It can include lying on an application, forgery, selling fake policies, faking a death, murder and agents not paying premiums to the insurance company.

Insurance scams are rampant

Insurance fraud is not limited to India. In the US, scammers cost non-health insurers upwards of $40 billion a year. In the UK, insurers uncovered 107,000 fraudulent claims worth almost $1.3 billion in 2019, according to a report by Deloitte.

In the US:

— An estimated $308.6 billion annually is lost to insurance fraud in the US each year.

— Insurance fraud costs an estimated $900 per consumer, mostly due to increased premiums as a result of fraud.

A study by Forbes reveals, "the most costly category of insurance fraud is health care insurance fraud (including Medicaid and Medicare insurance fraud), which costs consumers an estimated $105 billion annually, followed by life insurance fraud ($74.7 billion) and property and casualty insurance fraud ($45 billion)".

The Reinsurance Group of America (RGA), a global life and health reinsurer, lists what insurers can look at before dispatching a claim:

1. Body identification: Were the police called to the scene when the body was found, and how can the insurer access the police report? The report usually includes witness statements helpful in establishing the death's circumstances, collected evidence, and who identified the body.

2. Medical records: If the deceased was taken to a hospital, there might be hospital records available. Insurers should review these records to ensure they belong to the deceased person. Dental records can also aid in physical identification.

3. Autopsy access: If an autopsy was performed, the insurer should obtain the report as soon as possible.

4. Death certificate: Verification of the death certificate is essential but can be difficult in unfamiliar jurisdictions. Understanding the local process for issuing death certificates is crucial.

5. Cremation: Insurers should verify if a death certificate was issued before cremation, as some jurisdictions and religions require prompt cremation.

6. Appropriate documentation: Ensure documents are admissible in court proceedings, possibly requiring notarisation and an apostille for authentication.

7. Assets: Ask about the estate's assets. If the only asset is the life insurance policy, something might be amiss.

8. Legalities: Seek legal counsel to maintain privilege and confidentiality in communications, managing multiple communications to avoid waiving privilege.

Preventing insurance fraud

"Implementing measures such as mandating life insurance policy declarations on death certificates to alert medical professionals and establishing a centralised claims database across insurance companies can help detect and prevent fraud," says Mehta.

Preventing insurance fraud not only reduces the incurred claim ratio (ICR) and overall insurance premiums but also saves resources and time by expediting claim approvals, thereby enhancing reinsurers' confidence in partnering with insurance firms.