Frauds-in-Insurance-Sector
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Frauds in Insurance Sector
CATEGORIES OF INSURANCE FRAUD:
Insurance fraud is broken down into two major categories, property/casualty and life/health. This article will discuss life/health insurance fraud, which includes the term life insurance sector. Non-profit sites like the Coalition Against Insurance Fraud (CAIF) report that life/disability insurance fraud costs approximately $1.5 billion a year. The worst part is that this cost is passed along to consumers, most of whom would never consider committing insurance fraud themselves. Instead, they find themselves paying up to hundreds more annually on their premiums. Money paid by insurance companies for fraudulent insurance claims add to the companies’ annual (loss, a statistic that is always used to establish future rates. Insurance fraud is either internal (fraud within the insurance industry itself) or external (fraudulent activity by applicants, policyholders or third party claimants).
Internal Fraud:
Internal fraud often includes the creation of a fictitious company to generate insurance premiums and issue fraudulent policies. This is usually performed by professional con-artists, but there are some red flags to protect consumers from being the victim of life insurance fraud:
(1) Follow your instincts; if the deal sounds too good to be true, it
probably is. Do not allow yourself to feel pressured by an agent or company. If an agent does not directly answer your questions or seems particularly evasive, go elsewhere. (2)Beware of any life insurance plan that promises “vanishing” or severely reducing” premiums later in the life of the policy. (3)Don’t sign any application that has blank areas throughout the text. The fraudulent agent or company may later add in things that you did not agree to with your signature. Always get copies of what you signed.
(4)Save everything that has to do with the policy that you sign, including statements, records of correspondence, check stubs, etc. (5)Don’t buy coverage with terms that you don’t understand, or feel pressured into buying more that you need. (6)Never pay premiums in cash; always pay by cheque or money order. And always ask for a receipt for any payment. (7)Never buy insurance from an unlicensed agent or company. You can verify this information with you state’s Department of Insurance.
External Fraud:
For insurance companies, there are sets of indicators that arouse suspicion that a consumer or beneficiary is trying to deceive the company. Often just one of these indicators would mean little to a company; but evidence of several can be a severe red flat. If fraud is proven the claim will be denied and the crime will be reported to the authorities. Remember, insurance fraud is a felony, and comes with strict penalties. For example, in California, insurance fraud is punishable by up to five years imprison and a $50,000 fine. Indicators of external life insurance fraud include; (1)The death occurred during the policy’s contestable period, or shortly after the policy’s inception. (2)The claimant had several small policies in force (often with various companies, and/or of small enough amounts that no physical exam was required). (3)Evidence of financial distress directly prior to death (indicators include depletion/closing of accounts, etc.) (4)Recent changes in coverage, usually in increments that don’t require physical exams, and/or recent changes in beneficiaries. (5)Inconsistencies, mistakes, and/or blatant lies found on application. Insured was involved in an activity not considered customary for the person when he or she died.
(6) The body of said insured is never found, or identification is
incomplete (due to condition of deceased).
(7)The coverage amount (total if insured has several policies) is not commensurate with insured’s income and/or estimated economic worth. (8)The deceased was not well known by relatives and/or lived alone.
TYPES OF INSURANCE FRAUD:
The types of insurance fraud that exist are as diverse as the types of insurance policies that are available. Some of the major areas in which insurance fraud occurs are in the health care, automobile, and property insurance industries.
Health Care Insurance: The most common perpetrators of health care insurance fraud are health care providers. One reason for this, according to David Hyman, a Professor at the University Of Maryland School Of Law, is that the historically prevailing attitude in the medical professional is one of “fidelity to patients”. This incentive can lead to fraudulent practices such as billing insurers for treatments that are not covered by the patient’s insurance policy. To do this, physicians often bill for a different service, which is covered by the policy, / than that which was rendered. Another motivation for insurance fraud in the healthcare industry, just as in all other types of insurance fraud, is a desire for financial gain. Public healthcare programs such as Medicare are especially conductive to fraudulent activities, as they are often run on a fee-for service structure. Physicians use several fraudulent techniques to achieve this end. These can include”upcoding” or “upgrading,” which involve billing for more expensive treatments than those actually provided; providing and subsequently billing for treatments that are nor medically necessary; scheduling extra visits for patients; referring to patients to another physician when no further treatment is actually necessary; and “ganging,” or billing for services to family members or other individuals who are accompanying the patient but who did not personally receive any services. Automobile Insurance:
The Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance claims contained elements of suspected fraud. There is a wide variety of schemes used to defraud automobile insurance providers. These ploys can differ greatly in complexity and severity. Richard A. Derrig, Vice President of Research for the Insurance Fraud Bureau of Massachusetts, “lists several ways that auto-insurance fraud can occur. Examples of soft auto-insurance fraud can include filing more than one claim for a single injury, filing claims for injuries not related to an automobile accident, misreporting wage losses due to that were actually paid. Hard auto-insurance fraud can include activities such as staging automobile collisions, filing claims when the claimant was not actually involved in the accident, submitting claims for medical treatments that were not received, or inventing injuries. Another example is that a person may illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called “rate evasion??. For example, some drivers in Brooklyn drive with Pennsylvania license plates due to the fact that registering their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn. Hard fraud can also occur when claimants falsely report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent autoinsurance claims.
Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out schemes that are very complex. An example of one such ploy is given by Ken Domstein, author of accidentally, on Purpose: The Making of a personal Injury Underworld in America. In this scheme, known as a “swoop-and-squat,” one or more drivers in “swoop” cars force an unsuspecting driver into position behind a “squat” car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car. The passengers in the squat car then file a claim with the other driver’s insurance company his claim often includes bills for medical treatments that were not necessary or not received. Property Insurance: Fraudulent activities against property insurance providers consist of the destruction of property in order to receive insurance payments for it. Possible motivations for this can include obtaining payment that is worth more than the value of the property destroyed, or to destroy and / subsequently receive payment for goods that could not otherwise be sold. According to Alfred Manes, the majority of property insurance crimes
involve arson. One reason for this is that any evidence that a fire was started by arson is often destroyed by the fire itself. Accordingly to the United States Fire Administration, in the United States there were approximately 31,000 fires caused by arson in 2006, resulting in losses of $755 million. Property insurance fraud can also occur when claimants exaggerate the value of the property lost or damaged. DETECTING INSURANCE FRAUD: The detection of insurance fraud generally occurs in two steps. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. This can be done by computerized statistical analysis or by referrals from claims adjusters or insurance agents. The next step is to refer these claims to investigators for further analysis. Due to the sheer number of claims submitted each day, it would be far too expensive for insurance companies to have employees check each claim for symptoms of fraud. Instead, many companies use computers and statistical analysis to identify suspicious claims for further investigation. There are two main types of statistical analysis tools used: supervised and unsupervised. In both cases, suspicious claims are identified by comparing data about the aim to expected values. The main difference between the two methods is how the expected values are deprived. In a supervised method, expected values are obtained by analyzing records of both fraudulent and non-fraudulent claims. According to Richard J. Bolton and David B. Hand, both of Imperial College in London, this method has some drawbacks as it requires absolute certainty that those claims analyzed are actually either fraudulent or non-fraudulent, and because it can only be used to detect types of fraud that have been committed and identified before. Unsupervised methods of statistical detection, on the other hand, involve detecting claims that are abnormal. Both claims adjusters and computers can also be trained to identify “red flags,” or symptoms that in the past have often been associated with fraudulent claims. Statistical detection does not prove that claims are fraudulent; it merely identifies suspicious claims that need to be investigated further. Fraudulent claims can be one of two types. They can be otherwise legitimate claims that are exaggerated or ‘built up,” or they can be false claims in which the damages claimed never actually occurred. Once a built up claim is identified, insurance companies usually try to negotiate the claim down to the appropriate amount. Suspicious claims can also be
submitted to ‘special investigative units’, or SIUs for further investigation. These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims. These investigators look for certain symptoms associated with fraudulent claims, or otherwise look for evidence of falsification of some kind. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough. Examples: Following are some examples of real instances of insurance fraud that occurred in recent years: According to a report by a United States district court in Illinois, a psychiatrist who practiced as the Assistant Medical Directors and Medical Director at a psychiatric facility in Illinois from 1998 through 2002 submitted claims to Medicare for psychiatric and psychotherapy services that he in fact never actually provided. He also “up-coded,” or billed for more expensive services than those that were actually provided, many claims that he submitted to Medicare. In addition, he admitted patients that did not qualify for treatment so that he could submit bills for hospital care even though it was not medically necessary for those patients. Through these schemes, this psychiatrist was able to fraudulent obtain $875,881 in Medicare Reimbursements before his conviction in February of 2005. REASONS WHY FRAUDSTERS TARGET SENIORS: Con artists target seniors, particularly in insurance fraud and health scams because they are seem to be easily trusting and gullible. According to the FBI, some other reasons why seniors are targeted for fraud include: (1)Older citizens are likely to accumulate savings over the years and are likely to own their home and/or have a decent line of credit. They often are in a financial stable position. This attracts con artists who whip up new schemes and fake health products or insurances to scam the scam the savings of the elderly. (2)Individuals who grew up in the 1930s to the 1950s were raised to be polite and trusting. These are two positive traits, but can make an individual more vulnerable to con artists. Because these individuals tend to be too polite I say ’NO’ or just hang up the phone.
(3) Elder people are the least likely to report fraud for one or more
persons. Some of these reasons include they lack information on how to report a fraud, they have a hard time admitting that they fell
into a scam, or defrauded. As well as, elder victims of fraudsters often worry that their family members will began to think that they lack the mental capacity to manage their own financial affairs if they admit being defrauded.
(4) When an elderly victim reports fraud, they often make poor
witnesses. The con artists known the effects of age on memory and knows that by the time the victim realizes they have been / defrauded, which may be weeks or months after the incident they won’t be able to provide detail information to. This investigators, Information about how many times the fraudster called, the time of the day they called, if it was always the same person who called, the last time they talks to the person, if the person had an accent, what the person promised, etc.
(5) Lastly, older individuals often become the victim of health scams,
promising improved cognitive functions, longevity and cancer fighting products. This is because in a country like America that has new medical breakthroughs in vaccinations to cure older diseases, it gives individuals new hope. Hope that fraudsters use in their advantage as they promote their phony.
HOW TO AVOID HEALTH INSURANCE FRAUD? For some, tips on how seniors and other avoid health insurance fraud include: (1)Avoid signing blank insurance claim forms.
(2) Review your insurer’s benefits statement carefully. Call if you ‘have
any questions or need clarifications (3)Ask your health care providers what they charge for a visit, treatment, procedure, and what you will need to payout of your pocket. (4)Refuse to do business with door-to-door or telephone salespersons who offer free medical services on equipment. (5)Give your insurance/Medicate number only to those who provided you with certified medical services. (6)Make note of all of your health care and medical appointments. (7)Know if your doctor ordered special equipment for you.
ETHICAL ISSUES IN INSURANCE SECTOR INTRODUCTION: Ethical issues are of great significance in the financial service industry. Financial services are intangible and inseparable and the importance of trust and confidence is paramount. In insurance sector, there is a heavy reliance on personal selling and since these sales persons operate on commission basis, the following ethical issues can arise in the insurance sector. KEY ETHICAL ISSUES IN THE LIFE INSURANCE: (1)The insurance companies may resort representations of products and services. to misleading
(2)Clearing the application of the customer by our agent, without disclosing the illness and health problems. (3)The new private sector insurance companies are offering a large agency commission in breach of the 5% ceiling prescribed by the Insurance Regulatory Development Authority (IRDA). (4)Charging higher premium. (5)Pricing any insurance product is highly complicated and hence greater transparency is needed. (6)The insurance company sets a high quality service standard, but does not follow it. (7)Sales people (LIC Agents) have to deal with ethical conflicts such as whether to tell the truth to a policyholder or risk loosing business or to mislead the policyholder and get his/her policy. (8)In order to beat the competition, the new insurance companies and their agent offer gifts, payments, gift vouchers, cash refund, etc. (9)The insurance company may use political influence and lobby with government agencies to enact legislation. (10) Poaching of Agents: IRDA has suggested that there should be a cooling period of one year for an agent intruding to leave one company and join another. There would also be a minimum contract of 3 years.
(11) Delaying payments of valid claims. (12) Introducing policies which do not match the requirement of the policyholder. (13) Incompetent policies which do not match the requirement of the policyholder. (14) The policyholder is not aware about the mechanism for redressal of grievance.
(15)
The policyholder ombudsman.
is
not
informed
about
insurance
(16) The insurance company wants to earn higher profits at the expense of the policyholder. (17) The data of the policyholder is stored in a database. The insurance company cannot discriminate on the basis of the information stored. They should also not misuse this very personal private data of individual policyholders.
CATEGORIES OF INSURANCE FRAUD:
Insurance fraud is broken down into two major categories, property/casualty and life/health. This article will discuss life/health insurance fraud, which includes the term life insurance sector. Non-profit sites like the Coalition Against Insurance Fraud (CAIF) report that life/disability insurance fraud costs approximately $1.5 billion a year. The worst part is that this cost is passed along to consumers, most of whom would never consider committing insurance fraud themselves. Instead, they find themselves paying up to hundreds more annually on their premiums. Money paid by insurance companies for fraudulent insurance claims add to the companies’ annual (loss, a statistic that is always used to establish future rates. Insurance fraud is either internal (fraud within the insurance industry itself) or external (fraudulent activity by applicants, policyholders or third party claimants).
Internal Fraud:
Internal fraud often includes the creation of a fictitious company to generate insurance premiums and issue fraudulent policies. This is usually performed by professional con-artists, but there are some red flags to protect consumers from being the victim of life insurance fraud:
(1) Follow your instincts; if the deal sounds too good to be true, it
probably is. Do not allow yourself to feel pressured by an agent or company. If an agent does not directly answer your questions or seems particularly evasive, go elsewhere. (2)Beware of any life insurance plan that promises “vanishing” or severely reducing” premiums later in the life of the policy. (3)Don’t sign any application that has blank areas throughout the text. The fraudulent agent or company may later add in things that you did not agree to with your signature. Always get copies of what you signed.
(4)Save everything that has to do with the policy that you sign, including statements, records of correspondence, check stubs, etc. (5)Don’t buy coverage with terms that you don’t understand, or feel pressured into buying more that you need. (6)Never pay premiums in cash; always pay by cheque or money order. And always ask for a receipt for any payment. (7)Never buy insurance from an unlicensed agent or company. You can verify this information with you state’s Department of Insurance.
External Fraud:
For insurance companies, there are sets of indicators that arouse suspicion that a consumer or beneficiary is trying to deceive the company. Often just one of these indicators would mean little to a company; but evidence of several can be a severe red flat. If fraud is proven the claim will be denied and the crime will be reported to the authorities. Remember, insurance fraud is a felony, and comes with strict penalties. For example, in California, insurance fraud is punishable by up to five years imprison and a $50,000 fine. Indicators of external life insurance fraud include; (1)The death occurred during the policy’s contestable period, or shortly after the policy’s inception. (2)The claimant had several small policies in force (often with various companies, and/or of small enough amounts that no physical exam was required). (3)Evidence of financial distress directly prior to death (indicators include depletion/closing of accounts, etc.) (4)Recent changes in coverage, usually in increments that don’t require physical exams, and/or recent changes in beneficiaries. (5)Inconsistencies, mistakes, and/or blatant lies found on application. Insured was involved in an activity not considered customary for the person when he or she died.
(6) The body of said insured is never found, or identification is
incomplete (due to condition of deceased).
(7)The coverage amount (total if insured has several policies) is not commensurate with insured’s income and/or estimated economic worth. (8)The deceased was not well known by relatives and/or lived alone.
TYPES OF INSURANCE FRAUD:
The types of insurance fraud that exist are as diverse as the types of insurance policies that are available. Some of the major areas in which insurance fraud occurs are in the health care, automobile, and property insurance industries.
Health Care Insurance: The most common perpetrators of health care insurance fraud are health care providers. One reason for this, according to David Hyman, a Professor at the University Of Maryland School Of Law, is that the historically prevailing attitude in the medical professional is one of “fidelity to patients”. This incentive can lead to fraudulent practices such as billing insurers for treatments that are not covered by the patient’s insurance policy. To do this, physicians often bill for a different service, which is covered by the policy, / than that which was rendered. Another motivation for insurance fraud in the healthcare industry, just as in all other types of insurance fraud, is a desire for financial gain. Public healthcare programs such as Medicare are especially conductive to fraudulent activities, as they are often run on a fee-for service structure. Physicians use several fraudulent techniques to achieve this end. These can include”upcoding” or “upgrading,” which involve billing for more expensive treatments than those actually provided; providing and subsequently billing for treatments that are nor medically necessary; scheduling extra visits for patients; referring to patients to another physician when no further treatment is actually necessary; and “ganging,” or billing for services to family members or other individuals who are accompanying the patient but who did not personally receive any services. Automobile Insurance:
The Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance claims contained elements of suspected fraud. There is a wide variety of schemes used to defraud automobile insurance providers. These ploys can differ greatly in complexity and severity. Richard A. Derrig, Vice President of Research for the Insurance Fraud Bureau of Massachusetts, “lists several ways that auto-insurance fraud can occur. Examples of soft auto-insurance fraud can include filing more than one claim for a single injury, filing claims for injuries not related to an automobile accident, misreporting wage losses due to that were actually paid. Hard auto-insurance fraud can include activities such as staging automobile collisions, filing claims when the claimant was not actually involved in the accident, submitting claims for medical treatments that were not received, or inventing injuries. Another example is that a person may illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called “rate evasion??. For example, some drivers in Brooklyn drive with Pennsylvania license plates due to the fact that registering their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn. Hard fraud can also occur when claimants falsely report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent autoinsurance claims.
Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out schemes that are very complex. An example of one such ploy is given by Ken Domstein, author of accidentally, on Purpose: The Making of a personal Injury Underworld in America. In this scheme, known as a “swoop-and-squat,” one or more drivers in “swoop” cars force an unsuspecting driver into position behind a “squat” car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car. The passengers in the squat car then file a claim with the other driver’s insurance company his claim often includes bills for medical treatments that were not necessary or not received. Property Insurance: Fraudulent activities against property insurance providers consist of the destruction of property in order to receive insurance payments for it. Possible motivations for this can include obtaining payment that is worth more than the value of the property destroyed, or to destroy and / subsequently receive payment for goods that could not otherwise be sold. According to Alfred Manes, the majority of property insurance crimes
involve arson. One reason for this is that any evidence that a fire was started by arson is often destroyed by the fire itself. Accordingly to the United States Fire Administration, in the United States there were approximately 31,000 fires caused by arson in 2006, resulting in losses of $755 million. Property insurance fraud can also occur when claimants exaggerate the value of the property lost or damaged. DETECTING INSURANCE FRAUD: The detection of insurance fraud generally occurs in two steps. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. This can be done by computerized statistical analysis or by referrals from claims adjusters or insurance agents. The next step is to refer these claims to investigators for further analysis. Due to the sheer number of claims submitted each day, it would be far too expensive for insurance companies to have employees check each claim for symptoms of fraud. Instead, many companies use computers and statistical analysis to identify suspicious claims for further investigation. There are two main types of statistical analysis tools used: supervised and unsupervised. In both cases, suspicious claims are identified by comparing data about the aim to expected values. The main difference between the two methods is how the expected values are deprived. In a supervised method, expected values are obtained by analyzing records of both fraudulent and non-fraudulent claims. According to Richard J. Bolton and David B. Hand, both of Imperial College in London, this method has some drawbacks as it requires absolute certainty that those claims analyzed are actually either fraudulent or non-fraudulent, and because it can only be used to detect types of fraud that have been committed and identified before. Unsupervised methods of statistical detection, on the other hand, involve detecting claims that are abnormal. Both claims adjusters and computers can also be trained to identify “red flags,” or symptoms that in the past have often been associated with fraudulent claims. Statistical detection does not prove that claims are fraudulent; it merely identifies suspicious claims that need to be investigated further. Fraudulent claims can be one of two types. They can be otherwise legitimate claims that are exaggerated or ‘built up,” or they can be false claims in which the damages claimed never actually occurred. Once a built up claim is identified, insurance companies usually try to negotiate the claim down to the appropriate amount. Suspicious claims can also be
submitted to ‘special investigative units’, or SIUs for further investigation. These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims. These investigators look for certain symptoms associated with fraudulent claims, or otherwise look for evidence of falsification of some kind. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough. Examples: Following are some examples of real instances of insurance fraud that occurred in recent years: According to a report by a United States district court in Illinois, a psychiatrist who practiced as the Assistant Medical Directors and Medical Director at a psychiatric facility in Illinois from 1998 through 2002 submitted claims to Medicare for psychiatric and psychotherapy services that he in fact never actually provided. He also “up-coded,” or billed for more expensive services than those that were actually provided, many claims that he submitted to Medicare. In addition, he admitted patients that did not qualify for treatment so that he could submit bills for hospital care even though it was not medically necessary for those patients. Through these schemes, this psychiatrist was able to fraudulent obtain $875,881 in Medicare Reimbursements before his conviction in February of 2005. REASONS WHY FRAUDSTERS TARGET SENIORS: Con artists target seniors, particularly in insurance fraud and health scams because they are seem to be easily trusting and gullible. According to the FBI, some other reasons why seniors are targeted for fraud include: (1)Older citizens are likely to accumulate savings over the years and are likely to own their home and/or have a decent line of credit. They often are in a financial stable position. This attracts con artists who whip up new schemes and fake health products or insurances to scam the scam the savings of the elderly. (2)Individuals who grew up in the 1930s to the 1950s were raised to be polite and trusting. These are two positive traits, but can make an individual more vulnerable to con artists. Because these individuals tend to be too polite I say ’NO’ or just hang up the phone.
(3) Elder people are the least likely to report fraud for one or more
persons. Some of these reasons include they lack information on how to report a fraud, they have a hard time admitting that they fell
into a scam, or defrauded. As well as, elder victims of fraudsters often worry that their family members will began to think that they lack the mental capacity to manage their own financial affairs if they admit being defrauded.
(4) When an elderly victim reports fraud, they often make poor
witnesses. The con artists known the effects of age on memory and knows that by the time the victim realizes they have been / defrauded, which may be weeks or months after the incident they won’t be able to provide detail information to. This investigators, Information about how many times the fraudster called, the time of the day they called, if it was always the same person who called, the last time they talks to the person, if the person had an accent, what the person promised, etc.
(5) Lastly, older individuals often become the victim of health scams,
promising improved cognitive functions, longevity and cancer fighting products. This is because in a country like America that has new medical breakthroughs in vaccinations to cure older diseases, it gives individuals new hope. Hope that fraudsters use in their advantage as they promote their phony.
HOW TO AVOID HEALTH INSURANCE FRAUD? For some, tips on how seniors and other avoid health insurance fraud include: (1)Avoid signing blank insurance claim forms.
(2) Review your insurer’s benefits statement carefully. Call if you ‘have
any questions or need clarifications (3)Ask your health care providers what they charge for a visit, treatment, procedure, and what you will need to payout of your pocket. (4)Refuse to do business with door-to-door or telephone salespersons who offer free medical services on equipment. (5)Give your insurance/Medicate number only to those who provided you with certified medical services. (6)Make note of all of your health care and medical appointments. (7)Know if your doctor ordered special equipment for you.
ETHICAL ISSUES IN INSURANCE SECTOR INTRODUCTION: Ethical issues are of great significance in the financial service industry. Financial services are intangible and inseparable and the importance of trust and confidence is paramount. In insurance sector, there is a heavy reliance on personal selling and since these sales persons operate on commission basis, the following ethical issues can arise in the insurance sector. KEY ETHICAL ISSUES IN THE LIFE INSURANCE: (1)The insurance companies may resort representations of products and services. to misleading
(2)Clearing the application of the customer by our agent, without disclosing the illness and health problems. (3)The new private sector insurance companies are offering a large agency commission in breach of the 5% ceiling prescribed by the Insurance Regulatory Development Authority (IRDA). (4)Charging higher premium. (5)Pricing any insurance product is highly complicated and hence greater transparency is needed. (6)The insurance company sets a high quality service standard, but does not follow it. (7)Sales people (LIC Agents) have to deal with ethical conflicts such as whether to tell the truth to a policyholder or risk loosing business or to mislead the policyholder and get his/her policy. (8)In order to beat the competition, the new insurance companies and their agent offer gifts, payments, gift vouchers, cash refund, etc. (9)The insurance company may use political influence and lobby with government agencies to enact legislation. (10) Poaching of Agents: IRDA has suggested that there should be a cooling period of one year for an agent intruding to leave one company and join another. There would also be a minimum contract of 3 years.
(11) Delaying payments of valid claims. (12) Introducing policies which do not match the requirement of the policyholder. (13) Incompetent policies which do not match the requirement of the policyholder. (14) The policyholder is not aware about the mechanism for redressal of grievance.
(15)
The policyholder ombudsman.
is
not
informed
about
insurance
(16) The insurance company wants to earn higher profits at the expense of the policyholder. (17) The data of the policyholder is stored in a database. The insurance company cannot discriminate on the basis of the information stored. They should also not misuse this very personal private data of individual policyholders.
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