Motor insurers are stepping up efforts to curb third-party claim fraud as rising court-awarded compensation and a growing number of uninsured vehicles put further pressure on the segment, potentially affecting the cost of motor insurance for consumers, according to a report by ToI .
Go Digit General Insurance has secured an order from the Madras High Court to set up district-level special investigation teams across Tamil Nadu to probe suspected fraudulent insurance claims.
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The order, issued on July 29, covers cases involving fake accidents, misrepresentation, forged insurance policies, fabricated injuries, and false medical reports and bills.
The court has also directed authorities to initiate criminal proceedings against those found responsible. Police have been asked to collect relevant evidence, including call detail records, to support investigations. Departmental action has also been ordered against officials found to have facilitated such claims or failed to prevent them.
Fraud adds to pressure on third-party insurance
The case was filed after the insurer observed a rise in irregularities in motor third-party claims, company officials said.
Industry executives said fraudulent claims are emerging as a broader challenge for insurers at a time when the motor third-party segment is already facing mounting costs.
“Motor third-party fraud is likely to become an industry-level issue, as it is adding to losses at a time when there is growing strain due to an increase in the size of awards and a rise in the number of uninsured vehicles. One of the issues the industry is facing is the conversion of non-road traffic accident claims into motor accident claims,” Krishnamoorthy Rao, MD and CEO, Generali Central Insurance, told ToI.
Motor third-party insurance is mandatory for vehicle owners in India, with insurers paying compensation to third parties in accidents. Fraudulent claims can increase insurers' payouts and, in turn, add pressure to the economics of a segment that is already grappling with rising claims costs.
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Supreme Court ruling adds to insurers' provisions
Insurers are also increasing provisions following a recent Supreme Court judgement that introduced compensation under a separate head for loss of domestic care.
Under the ruling, compensation is calculated using a monthly income of Rs 30,000, with periodic revisions to account for inflation and socio-economic changes. Previously, compensation under this aspect was linked to a multiple of the victim's income.
With higher awards increasing potential liabilities, insurers are now facing pressure from both legitimate claims costs and fraudulent or inflated claims, making tighter scrutiny of motor third-party claims increasingly important for the industry.
(With inputs from ToI)
