“Rising frauds lead to greater operational menace. ”

Insurance is one of the tools for hazard direction that aims at cut downing the hazard on the daily life of persons. administration and society. At the same clip. it should besides be appreciated that insurance can non be utilised as a hazard free tool for all types of state of affairss. Insurance provides hazard direction solutions to many state of affairss that fall within the competency of human opinion and managerial accomplishments.

Insurance is really of import in today’s universe there are figure hazard which people face in their daily life. The different types of insurance are life insurance. wellness insurance. car insurance. and belongings insurance. These are the most common types of insurance. Other types of insurance include terrorist act insurance. cardinal adult male insurance etc.

As there are figure of advantages in taking an insurance policy. it is besides associated with many hazards. There are figure of frauds taking topographic point in the insurance sector. Peoples have to be really cautious while taking an insurance policy.

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Insurance is a federal topic in India. It is a capable affair of solicitation. The statute laws that deal with insurance concern in India are Insurance Act. 1938 and Insurance Regulatory & A ; Development Authority Act ( IRDA ) . 1999.



Insurance. in jurisprudence and economic sciences. is a signifier of hazard direction chiefly used to fudge against the hazard of a contingent loss. Insurance is defined as the just transportation of the hazard of a loss. from one entity to another. in exchange for a premium. and can be thought of as a guaranteed and known little loss to forestall a big. perchance annihilating loss. An insurance company is a company selling the insurance ; an insured or policyholder is the individual or entity purchasing the insurance. The insurance rate is a factor used to find the sum to be charged for a certain sum of insurance coverage. called the premium. Risk direction. the pattern of measuring and commanding hazard. has evolved as a distinct field of survey and pattern. There are figure of frauds taking topographic point in the insurance industry. Insurance fraud is any act committed with the purpose to fraudulently obtain payment from an insurance company. Insurance fraud poses a really important job. and authoritiess and other organisations are doing attempts to discourage such activities.

On the one manus. human life is capable to assorted risks—risk of decease or disablement due to natural or inadvertent causes. Worlds are besides prone to diseases. the intervention of which may affect immense outgo. On the other manus. belongings owned by adult male is exposed to assorted jeopardies. natural and semisynthetic. It is of import for all to understand the assorted merchandises that life and general insurance companies offer before they make a pick as to the merchandise they want to purchase. As per ordinances. insurance companies have to give the assorted characteristics of the merchandises at the point of sale. The insured should besides travel through the assorted footings and conditions of the merchandises and understand what they have bought and met their insurance demands.

They ought to understand the claim processs so that they know what to make in the event of a loss. The construct behind insurance is that a group of people exposed to similar hazard come together and do parts towards formation of a pool of financess. In instance a individual really suffers a loss on history of such hazard. he is compensated out of the same pool of financess. Contribution to the pool is made by a group of people sharing common hazards and collected by the insurance companies in the signifier of premiums.


Insurance sector in India is one of the flourishing sectors of the economic system and is turning at the rate of 15-20 per cent annum. Together with banking services. it contributes to about 7 per cent to the country’s GDP. Insurance is a federal topic in India and Insurance industry in India is governed by Insurance Act. 1938. the Life Insurance Corporation Act. 1956 and General Insurance Business ( Nationalisation ) Act. 1972. Insurance Regulatory and Development Authority ( IRDA ) Act. 1999 and other related Acts.

The beginning of life insurance in India can be traced back to 1818 with the constitution of the Oriental Life Insurance Company in Calcutta. It was conceived as a means to supply for English Widows. In those yearss a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered riskier for coverage. The Bombay Mutual Life Insurance Society that started its concern in 1870 was the first company to bear down same premium for both Indian and non-Indian lives. In 1912. insurance ordinance officially began with the passing of Life Insurance Companies Act and the Provident Fund Act.

By 1938. there were 176 insurance companies in India. But a figure of frauds during 1920s and 1930s tainted the image of insurance industry in India. In 1938. the first comprehensive statute law sing insurance was introduced with the passing of Insurance Act of 1938 that provided rigorous State Control over insurance concern.

Insurance sector in India grew at a faster gait after independency. In 1956. Government of India brought together 245 Indian and foreign insurance companies and provident societies under one nationalised monopoly corporation and formed Life Insurance Corporation ( LIC ) by an Act of Parliament. viz. LIC Act. 1956. with a capital part of Rs. 5 crore.

The ( non-life ) insurance business/general insurance remained with the private sector boulder clay 1972. There were 107 private companies involved in the concern of general operations and their operations were restricted to organised trade and industry in big metropoliss. The General Insurance Business ( Nationalisation ) Act. 1972 nationalised the general insurance concern in India with consequence from January 1. 1973. The 107 private insurance companies were amalgamated and grouped into four companies: National Insurance Company. New India Assurance Company. Oriental Insurance Company and United India Insurance Company.

These were subordinates of the General Insurance Company ( GIC ) . The first insurance company in the United States underwrote fire insurance and was formed in Charles Town ( contemporary Charleston ) . South Carolina. in 1732. Benjamin Franklin helped to popularise and do criterion the pattern of insurance. peculiarly against fire in the signifier of ageless insurance. In 1752. he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin’s company was the first to do parts toward fire bar. Not merely did his company warn against certain fire jeopardies. it refused to see certain edifices where the hazard of fire was excessively great. such as all wooden houses. In the United States. ordinance of the insurance industry is extremely Balkanized. with primary duty assumed by single province insurance sections.

Whereas insurance markets have become centralized nationally and internationally. province insurance commissioners operate separately. though at times in concert through a national insurance commissioners’ organisation. In recent old ages. some have called for a double province and federal regulative system ( normally referred to as the Optional federal charter ( OFC ) ) for insurance similar to that which oversees province Bankss and national Bankss. In 1993. the first measure towards insurance sector reforms was initiated with the formation of Malhotra Committee. headed by former Finance Secretary and RBI Governor R. N. Malhotra. The commission was formed to measure the Indian insurance industry and urge its future way with the aim of complementing the reforms initiated in the fiscal sector.

Key Recommendations of Malhotra Committee:
* Government interest in the insurance Companies to be brought down to 50 % . * Government should take over the retentions of GIC and its subordinates so that these subordinates can move as independent corporations. * All the insurance companies should be given greater freedom to run.

* Private Companies with a lower limit paid up capital of Rs. 1billion should be allowed to come in the industry. * No Company should cover in both Life and General Insurance through a individual Entity. * Foreign companies may be allowed to come in the industry in coaction with the domestic companies. * Postal Life Insurance should be allowed to run in the rural market. * Merely one State Level Life Insurance Company should be allowed to run in each province.

Regulatory Body
* The Insurance Act should be changed.
* An Insurance Regulatory organic structure should be set up.
* Controller of Insurance should be made independent.

* Mandatory Investments of LIC Life Fund in authorities securities to be reduced from 75 % to 50 % . * GIC and its subordinates are non to keep more than 5 % in any company.

Customer Service
* LIC should pay involvement on holds in payments beyond 30 yearss * Insurance companies must be encouraged to put up unit linked pension programs. * Computerisation of operations and updating of engineering to be carried out in the insurance industry. Malhotra Committee besides proposed puting up an independent regulative organic structure – The Insurance Regulatory and Development Authority ( IRDA ) to supply greater liberty to insurance companies in order to better their public presentation and enable them to move as independent companies with economic motivations.

Insurance sector in India was liberalized in March 2000 with the transition of the Insurance Regulatory and Development Authority ( IRDA ) Bill. raising all entry limitations for private participants and leting foreign participants to come in the market with some bounds on direct foreign ownership. IRDA consists of a Chairman and some lasting every bit good as portion clip members. The ordinances. nevertheless. are enacted under the counsel of a statutory consultative commission Full force and public-service corporation of assorted establishments like Advisory Committee and self-regulatory organisations are non yet realized as the regulator seems to be in a long acquisition manner.

Due to over deputations. Individual officeholders decide the gait and extent of use of prudential and statutory organic structures. There is a 26 per centum equity cap for foreign spouses in an insurance company. There is a proposal to increase this bound to 49 per centum. The opening up of the insurance sector has led to rapid growing of the sector. Soon. there are 16 life insurance companies and 15 non-life insurance companies in the market. The possible for growing of insurance industry in India is huge as about 80 per cent of Indian population is without life insurance screen while wellness insurance and non-life insurance continues to be good below international criterions.


Insurance provides compensation to a individual for an awaited loss to his life. concern or an plus. Insurance is loosely classified into two parts covering different types of hazards: 1. Long-term ( Life Insurance )

2. General Insurance ( Non-life Insurance )
Long-run Insurance

Long term insurance is so called because it is meant for a long-run period which may stretch to several old ages or whole lifetime of the insured. Long-run insurance covers all life insurance policies. Insurance against hazard to one’s life is covered under ordinary life confidence. Ordinary life confidence can be farther classified into following types:

Types of Ordinary Life Assurance| Meaning|

1. Whole Life Assurance| In whole life confidence. insurance company collects premium from the insured for whole life or till the clip of his retirement and wages claim to the household of the insured merely after his decease. | 2. Endowment Assurance| In instance of endowment confidence. the term of policy is defined for a specified period say 15. 20. 25 or 30 old ages. The insurance company pays the claim to the household of assured in an event of his decease within the policy’s term or in an event of the assured lasting the policy’s term. | 3. Assurances for Children| I ) . Child’s Deferred Assurance: Under this policy. claim by insurance company is paid on the option day of the month which is calculated to co-occur with the child’s eighteenth or 20 foremost birthdays. In instance the parent survives till option day of the month. policy may either be continued or payment may be claimed on the same day of the month.

However. if the parent dies before the option day of the month. the policy remains continued until the option day of the month without any demand for payment of premiums. If the kid dies before the option day of the month. the parent receives back all premiums paid to the insurance company. | | two ) . School fee policy: School fee policy can be availed by set uping an gift policy. on the life of the parent with the amount assured. collectible in episodes over the schooling period. | 4. Term Assurance| The basic characteristic of term confidence programs is that they provide decease risk-cover. Term confidence policies are merely for a limited clip. claim for which is paid to the household of the assured merely when he dies.

In instance the assured survives the term of policy. no claim is paid to the assured. | 5. Annuities| Annuities are merely face-to-face to life insurance. A individual come ining into an rente contract agrees to pay a specified amount of capital ( lump amount or by episodes ) to the insurance company. The insurance company in return promises to pay the insured a series of payments until insured’s decease. Generally. life rente is opted by a individual holding surplus wealth and wants to utilize this money after his retirement. There are two types of rentes. viz. :

Immediate Annuity: In an immediate rente. the insured pays a ball amount sum ( known as purchase monetary value ) and in return the insurance company promises to pay him in episodes a specified amount on a monthly/quarterly/half-yearly/yearly footing. Deferred Annuity: A deferred rente can be purchased by paying a individual premium or by manner of episodes. The insured starts having rente payment after a oversight of a selected period ( besides known as Deferment period ) . | 6. Money Back Policy| Money dorsum policy is a policy opted by people who want periodical payments. A money dorsum policy is by and large issued for a peculiar period. and the amount assured is paid through periodical payments to the insured. spread over this clip period. In instance of decease of the insured within the term of the policy. full amount assured along with fillip accruing on it is collectible by the insurance company to the campaigner of the deceased. |

General Insurance

Besides known as non-life insurance. general insurance is usually meant for a short-run period of 12 months or less. Recently. longer-term insurance understandings have made an entry into the concern of general insurance but their term does non transcend five old ages. General insurance can be classified as follows:

Fire Insurance| Fire insurance provides protection against harm to belongings caused by accidents due to fire. buoy uping or detonation. whereby the detonation is caused by boilers non being used for industrial intents. Fire insurance besides includes harm caused due to other hazards like storm storm or inundation ; burst pipes ; temblor ; aircraft ; public violence. civil disturbance ; malicious harm ; detonation ; impact. | Marine Insurance| Marine insurance fundamentally covers three hazard countries. viz. . hull. lading and cargo. The hazards which these countries are exposed to are jointly known as “Perils of the Sea” . These hazards include larceny. fire. hit etc. | | Marine Cargo: Marine lading policy provides protection to the goods loaded on a ship against all hazards between the going and reaching warehouse.

Therefore. marine lading covers passenger car of goods by sea every bit good as transit of goods by land. | | Marine Hull: Marine hull policy provides protection against harm to transport caused due to the hazards of the sea. Marine hull policy covers three-fourth of the liability of the hull proprietor ( ship-owner ) against loss due to hits at sea. The staying 1/4th of the liability is looked after by associations formed by ship-owners for the intent ( P and I clubs ) . | Miscellaneous| As per the Insurance Act. all types of general insurance other than fire and Marine insurance are covered under assorted insurance. Some of the illustrations of general insurance are motor insurance. larceny insurance. wellness insurance. personal accident insurance. money insurance. technology insurance etc. | I


Definition of fraud

Fraud is defined as “any behavior by which one individual intends to derive a dishonorable advantage over another” . In other words. fraud is an act or skip which is intended to do unlawful addition to one individual and unlawful loss to the other. either by manner of privacy of facts or otherwise.

Definition of fraud u/s 17 of Indian Contract Act

Fraud means and includes any of the undermentioned Acts of the Apostless committed by a party to a contract. or with his collusion or by his agent. with purpose to lead on another party thereto or his agent. or to bring on him to come in into the contract:

( I ) the suggestion. as a fact of that which is non true or by one who does non believe it to be true ; ( two ) the active privacy of a fact by one holding cognition or belief of the fact ; ( three ) A promise made without any purpose of assuring it ; ( four ) Any other fact fitted to lead on ; and

( V ) Any such act or skip as the jurisprudence specially declares to be deceitful.

The importance of analyzing insurance fraud can non be over-emphasized. Once the types of fraud are determined & amp ; detected. & A ; the modus operandi is discovered. insurance companies can take steps to cut down cases of fraud. These steps include. warning insured about fraud & A ; implementing more rigorous security steps for confirmation of individuality. Knowing the assorted types of frauds every bit good as an in-depth survey of the most frauds that have taken topographic point boulder clay now is imperative if we are to cut down the incidence of these offenses to a lower limit.


Fraud occurs when person wittingly lies to obtain some benefit or advantage to which they are non otherwise entitled or person wittingly denies some benefit that is due and to which person is entitled. Depending on the specific issues involved. an alleged wrongful act may be handled as an administrative action by the Department or the Fraud Division may manage it as a condemnable affair. Insurance fraud is any act committed with the purpose to fraudulently obtain payment from an insurance company. Insurance fraud has existed of all time since the beginning of insurance as a commercial endeavor. Deceitful claims account for a important part of all claims received by insurance companies. and cost one million millions of dollars yearly. Types of insurance fraud are really diverse. and happen in all countries of insurance. Insurance offenses besides range in badness. from somewhat overstating claims to intentionally doing accidents or harm.

Deceitful activities besides affect the lives of guiltless people. both straight through accidental or purposeful hurt or harm. and indirectly as these offenses cause insurance premiums to be higher. Insurance fraud poses a really important job. and authoritiess and other organisations are doing attempts to discourage such activities. Insurance fraud is perceived as a victimless offense. but the estimated losingss from this offense exceed $ 100 Billion every twelvemonth. Ten per centum of all types of insurance claims belongings & A ; casualty. wellness. life. workers’ compensation ) are suspected to be deceitful. Harmonizing to the Insurance Research Council. 30 % of all bodily hurt Arizona appears to be deceitful or contain hurt hyperbole.

In Phoenix. that figures goes up to 36 % . The losingss from deceitful car insurance claims in Arizona cost policyholders an estimated norm of $ 167 to $ 200 in higher one-year premiums. Insurance fraud impacts the public by doing us all to pay higher insurance premiums. In add-on. concerns may go through along their increased insurance costs to their clients in the signifier of higher monetary values. All of this translates to more money out of YOUR pocket!


The “chief motivation in all insurance offenses is fiscal net income. ” Insurance contracts provide both the insured and the insurance company with chances for development. One ground that this chance arises is in the instance of over-insurance. when the sum insured is greater than the existent value of the belongings insured.

This status can be really hard to avoid. particularly since an insurance supplier might sometimes promote it in order to obtain greater net incomes. This allows fraudsters to do net incomes by destructing their belongings because the payment they receive from their insurance companies is of greater value than the belongings they destroy.

Insurance companies are besides susceptible to fraud because false insurance claims can be made to look like ordinary claims. This allows fraudsters to register claims for amendss that ne’er occurred. and so obtain payment with small or no initial cost. The most common signifier of insurance fraud is blow uping of loss.


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