Application fraud in life insurance
There are many types of fraud in insurance, including false claims, forgeries, bogus policies, and the most prevalent, application fraud, which involves giving the insurance company false information when applying for a policy.
How the fraud works
Application fraud occurs when fraudsters hide their preexisting medical condition with the hope of getting a lower premium for maximum insurance benefits. Or for beneficiaries to claim insurance benefits without having to pay much premium when the insured die because of an illness, which is supposed to be an exclusion.
In terms of the consequences, application fraud seems to be less risky to commit than other types of fraud. When filling out the application form or answering the phone call from the insurance agent, it sometimes just takes a little bravery to conceal the truth. While other types of insurance fraud may result in prosecution or criminal charges, the sole risk for application fraudsters is having their application or claim rejected.
Nonetheless, the effect of application fraud on companies is significant. Consider a life insurance claim with a payout in the hundreds of millions of rupiahs that the insurance company must pay only a few months after the policy was issued. When you compound this with hundreds of similar incidents, an insurance company is certain to be in a predicament.
Challenges in investigation
The investigation is done by verifying the medical records of the insured. However, finding a concealed truth is not always that easy. It is common for the insured to have no recorded medical treatment due to the fact that they live in a remote area where health facilities are almost non-existent. Also, in another case, the insured resided in a small village where public health care is only available for half a day and medical records are stored carelessly.
Furthermore, people who live in a more traditional way would rather take a traditional solution than visit a doctor when they get sick. These kinds of things make investigation more challenging.
Meanwhile, the insured who live in a contemporary environment, such as large cities with ample health care, have a slew of creative ways to conceal their pre-existing medical condition. They may have had their medical records stored in foreign hospitals, making it difficult for investigators to get them.
There is, however, always a way to uncover the truth. The open and amicable nature of Indonesian society benefits investigators. People in the neighborhood or relatives of the insured might spill some critical information. General practitioners nearby might shed some light on a few things as well. Hence, canvassing hospitals, clinics, and other health facilities may yield significant information. This though requires a solicitation technique and an investigative approach honed for years.