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Car Insurance Fraud in India and Ways to Avoid It

Team AckoJul 22, 2021

The car insurance industry is a complex network of agents, insurers and involves a lot of money. And, whenever there is a large amount of money running through different systems, there is a possibility of fraud. Car insurance scams in India are a concern for both policyholders and insurance companies. A prime example of fraud is that many policyholders realise they have purchased a fake insurance policy only when they submit a claim against the policy.

Car Insurance Fraud in India

While some insurance frauds are categorised as false claims, some frauds are classified as false policies. As a result, innocent people fall prey to fraud insurance providers and fraud insurance agents. That is the reason insurers such as ACKO are spearheading digital-first insurance plans that work on a direct-to-customer model so that you can transact directly with us.

Here are some ways you can avoid or identify car insurance fraud so that you can stay protected at all times.

What is Car Insurance Fraud?

Any kind of fraud committed using vehicle insurance can be defined as car insurance fraud. Insurance fraud can be committed by fraudulent insurance companies or fraudulent agents/middlemen working in the industry. It can also be committed against them.

Types of Car Insurance Fraud

Here are the main types of car insurance fraud in India.

1. Insurance Fraud Against the Insurance Company

Insurers are sometimes victims of fraud. Fraudsters use different methods to hoodwink insurance companies to settle claims. Techniques such as exaggerating damage, increasing the claim to make up for the deductible, staged accidents, and targeting victims.

2. Insurance Fraud Against the Policyholder

While many think insurance companies are at the receiving end when it comes to fraudulent activities, policyholders also fall victim to fraud. This can be due to fake insurance policies or agents.

Examples of Car Insurance Fraud

Here are examples of auto insurance frauds:

Fraud Against Insurers:

  • Exaggerating damages

  • Staged accidents

  • Claims fraud

  • Application fraud

  • Forgery

  • Eligibility fraud

  • Internal or external fraud (employees or agents)

Fraud Against Policyholders:

  • Fake insurance policies

  • Unrealistic benefits and features

  • Fake payment beneficiaries

  • Spurious calls

Consequences of Car Insurance Fraud

Auto insurance scams or fraud is a matter of great concern. Under the Indian Penal Code (IPC), motor insurance fraud can be dealt with as a fraudulent act, cheating, forgery, etc. If there is a fraudulent act on motor insurance, then he/she will be dealt with as per the IPC.

What is a Fake Insurance Policy?

Fake or unauthorised companies approach potential customers to sell insurance plans to make money and not provide insurance coverage. You will realise that you have been deceived only when you raise a claim against that policy. By then, the fraudulent company or agent has made money, and you end up getting cheated.

Identifying a fake car insurance policy is crucial before buying the plan for your vehicle. It is essential to research the insurance company and the agent before saying yes to the plan.

Ways to Avoid Car Insurance Fraud

Here are a few tips to avoid a fake insurance company or agent while buying an insurance policy for your car.

Avoid Agents, Buy Directly From The Insurer

Insurance companies such as ACKO do not have agents or middlemen and follow the direct-to-customer model. Additionally, ACKO is a digital-first company; hence, it works on a completely online platform. With no agents, you can buy car insurance directly from ACKO, thereby eliminating any possible fraudulent activities.

Also, ensure you purchase the plan from a reputable insurance company such as ACKO, which is a licensed insurer. You may be compromised by buying the policy from an insurance company that is not registered with the IRDAI.

Get the Receipt of the Insurance Premium

Every time you pay the premium, make sure you get the receipt for the same. It is prudent to make it a habit to procure a receipt for payments. In case you find that the policy is fake, you can use the receipt as proof while fighting the fraudulent insurer legally.

Read the Terms and Conditions

Most people do not read the finer details of the policy. Reading the terms and conditions helps you understand the policy’s features and benefits. Details such as No Claim Bonus, Insured Declared Value, and deductibles are an important part of vehicle insurance. 

Hence, you must give importance to the terms and conditions before you buy the plan. If you find an error, rectify it immediately so that your claims are not rejected.

Consider Paying By Cheque/Online/Credit Card

By paying the premium through a cheque, credit card, or net banking, you pay the premium directly to the insurance company and not to an agent or middlemen. By paying through these modes, you can be assured that it will come in handy in the future.

Verify Via the QR Code

As per the guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI), a QR is compulsory for every insurance policy. You can scan the code to verify if the policy is genuine or not. The QR code of the policy contains the status and the details of the insurance plan helping you verify the authenticity of the policy.

Never Sign on a Blank Forms or Cheques

Fill the application form yourself or buy the policy directly from insurers such as ACKO. Never sign on a blank paper/form or cheque to avoid fraud. Signing on a blank document or cheque gives the fake or a legit agent to buy a different insurance product using the form you have signed.

Do Not Fall for Unrealistic Benefits

It is advisable to suspect calls or approaches by agents offering unrealistic benefits and features which are too good to be true. Agents or insurance companies providing such services cannot provide benefits beyond the scope of the policy; hence, verify twice with the insurance company before falling for the fake offers.

Key Takeaways

  • Buy directly from insurers such as ACKO, which provides car insurance through the direct-to-model approach.

  • Get a receipt for all payments of the premium.

  • Read the terms and conditions of the policy.

  • Do not fall for unrealistic benefits and features of a policy.

  • Consider making payments through online/credit card/cheque.

Frequently Asked Questions

Here are commonly asked questions about car insurance scams or fraud.

Is it illegal to lie on car insurance?

Yes, it is illegal to lie on auto insurance since it may be considered forgery, cheating, or fraud.

What happens if I lie on a car insurance claim about an accident?

The insurance company will reject the claim.

How do I know if I was involved in a car insurance fraud?

While you may not know that you have received a fake policy, you will see that you were involved in a car insurance fraud when you raise a claim against the policy, and it is rejected since the policy is fake.

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