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Insurance scam: IRDA warns against fraudulent agents who mis-sell products with refund baits

Monday, 1 September 2014 - 7:23am IST Updated: Monday, 1 September 2014 - 9:55am IST | Place: Mumbai | Agency: dna

The Insurance Regulatory and Development Authority (Irda) has issued a circular warning against fictitious offers, including insurance bonus and refunds, and advises customers to contact the police to furnish the numbers from which the calls originate.

At least 15 insurance companies have received 4,500 alert calls from customers in the last three months on the commission-bonus offer, a finance executive at a large private insurance firm said.

The modus operandi is simple: The caller, posing as a `new' agent, gains the confidence of policy holder by detailing the latter's details like address, policy numbers, sum assured and date of policy issuance.

Next, this 'new agent' will portray the original agent as a fraudster who has claimed Rs 50,000-2 lakh as commission on the bonus earned from the policy.

The 'new agent' then asks for one cancelled cheque and another in the name of a different product of another insurance company from the policy holder "in
order to prevent the other agent from getting the rightful money of the policy holder".

He gets these documents under the guise of adjusting the claimed bonus.

The policy holder will become aware of the fraud only after three months, by which time the agent would have become untraceable on the number provided. By then, the policy holder's switchover to the new insurance company is also complete.

While the new agent traps the customer with a new policy that helps him earn the highest commission, the latter ends up owning two policies.

"It's the greed of getting free money that makes the customer behave exactly the way fraudsters want," said a marketing head of a bank which also sells insurance.

"We have observed a pattern in the calls made. It usually takes place around pay-out time of an existing policy or month-end when premiums are due," he said.

"We receive about 500 applications every month-end and person at at the counter is usually a fresher or with a few months of experience. Hence, the likelihood of detecting incomplete applications or forged documents is near zero at the counter," he said.

Most insurance companies refund policy premiums once such cases are brought to their notice, he added.

Insurance companies track the numbers after complaints are filed with them. "But the police have been largely non-cooperative and insists that the complainant must be the policy holder and not the company," said a senior official at a private insurance company.

According to Irda's website, some names being used by miscreants include Rakesh Bajaj, Manju Arora, R Srinivasan, Mukesh Kumar, said Irda's official website.

Irda chief TS Vijayan was unavailable for a comment.

Industry players said Delhi is where most of this cheating takes place and in products where commissions range between 15% and 30%. "The new product is never in the interest of the customer," he added.
Since most of these brokers have appointed sub-brokers who, in turn, sub-lets assignments with targets, nailing the culprit becomes an issue, due to a massive churn at the bottom of the pyramid. The misuse of data base is rampant, said an insurance official at a government company.

The data becomes easily available as most companies outsource their field operations to cut costs.

There are allegations that a few insurance companies officials are also hand-in- glove with the fraudsters. However, most insurers said that at the employee levels, firewalls prevent abuse though a few have been dismissed from services in the past.

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