use of legal measures to handle unreasonable claim demands,exaggerated and fraudulent claims
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6 May 2002
May 12, 2011
Use of Legal measures to handle unreasonable claim demands,exaggerated and fraudulent claims
Ramji Mishra, National Head-Claims( Legal & Compliance )
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Increased Frauds
Q & A
Best Practices
Legal action: ADeterrent
Litigation Vs.
settlement
Increased Litigationcosts
US: $80 to 100 bn Australia: A$ 2.1 bn UK : 1.6 bn
5 to 10% leakage
Need for properevaluation beforeventuring into litigation
High number of casesgoing into litigation esp.
Bodily injury claims Fraudsters stay awayfrom companieswhich take legalaction & tough standin fraudulent claims
Discussions
To share the bestpractices
Legalmeasures
Objective
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Co
ntents
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2
Typology ofFraudulent claim &evaluation forlitigation
Objective
3Litigation as aDeterrent
4
Key requirementsfor contestedcases
55Best Practices &Best Practices &
cost Managementcost Management
66 Q & AQ & A
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Co
ntents
1
2
Typology ofFraudulent claim &evaluation forlitigation
Objective
3Litigation as aDeterrent
4
Key requirementsfor contestedcases
55Best Practices &Best Practices &
cost Managementcost Management
66 Q & AQ & A
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Litigation : a Deterrent
The universal equation says:The universal equation says:
Incidence of fraud =Incidence of fraud = The inclination + The opportunityThe inclination + The opportunityThe resistanceThe resistance
It is effective resistance which successfully manages fraud, whiIt is effective resistance which successfully manages fraud, whilst maintaining highlst maintaining highlevels of customer servicelevels of customer service
Prompt Penal action / litigation & image of the company work asPrompt Penal action / litigation & image of the company work as deterrent fordeterrent for
potential fraudsterpotential fraudster
Meritorious claims should be paid promptly and pleasantly.Meritorious claims should be paid promptly and pleasantly. Fraudulent, exaggerated or unFraudulent, exaggerated or un--meritorious claims should be resisted vigorouslymeritorious claims should be resisted vigorously
It appears to be almost universal view that in any population:It appears to be almost universal view that in any population:
10% of people are inherently honest10% of people are inherently honest 10% are inherently dishonest and10% are inherently dishonest and
the other 80% could go either waythe other 80% could go either way
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Case study Contd:Result of Investigation
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Police Action
Complaint by insurer
Arrested 2 advocates, 4 ladies whoposed as wife; uncle.
Murder of an innocent labourercame to light.
Earlier murder also came out
Fake MACT claims 2 in whichadvocate had given his own car found.
The investigation was done byThe investigation was done by
SIU ofSIU of TataAIGTataAIG..
The arrest of Advocates &The arrest of Advocates &other accused send the clearother accused send the clear
message to the market /message to the market /
potential fraudster not to messpotential fraudster not to mess
withwith TataAIGTataAIG..
There was a markedThere was a marked
reduction in fraudulent claimsreduction in fraudulent claimsin the area.in the area.
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Case Study II: Marine Claim Fraud
Background:
Client an exporter.
Has open policies with us.
Mostly, ICC-C cover.
Sought ICC-C with total non-
delivery & trans-shipment coverat Sri Lanka, for a furniture
consignment to Canada.
Claim for total non-delivery approx. INR 4.5 Mn.
The loss:Consignment stuffed in acontainer containing 2 others
one for Sri Lanka & one forMalaysia.
At Colombo, SL consigneeallegedly took away Canadianconsignment and SL consignmentwent to Canada.
Claim lodged with AIG office inCanada by consignee.
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Case Study II
Investigation findings:Consignee remitted money in
spite of being aware of non-
delivery.
Fumigation Cert after stuffing!
The 3 consignments
The one insured by us.
Second, of another firm,meant for Malaysia.
Third, meant for SL.
Findings the 3 consignments:
First, was subject of loss.
Second consignor, sisterconcern of insured.Third, Chennai firm linked toinsured firm.
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Case Study II
The Chennai firm:Not existing at the address, a
residential flat.
Owner informed, was a defaulter.Bank had seized the flat.
No exports in last FY.
Two exports in current year oneinvolving loss with us and other,
with CGU Australia.
Others in the mystery link:
In case of CGU loss, 2nd firm ofthe triad had sent consignment,
which had got mixed up atMalaysia.
The NVOCCs Delhi address wasagain a flat and there was no firmby that name there.
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Case Study II
Clinching insuredfronting forConsignee &NVOCC!
Consignor Consignee same
location - Chandigarh
Consignor Consignee &NVOCCsame location -Chandigarh
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Case Study II: Conclusion
The insured/ consignor went to State Consumer Forum, Chandigarh, which
dismissed the petition with costs saying:
The entire case smacks of fraud with the object of cheating
the insurance company by claiming the insurance amount
from them. In fact, it appears to be fit case for registering a
criminal case of fraud and fabrication of documents against
the complainants. We do not find any merit in this complaintand the same is accordingly dismissed with litigation costs of
Rs.10,000/-.
Tough stand / forceful litigation, against fraudster, always woTough stand / forceful litigation, against fraudster, always works as a deterrentrks as a deterrent
tool for Insurertool for Insurer
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Co
ntent
s
1
2
Typology ofFraudulent claim &evaluation forlitigation
Objective
3Litigation as aDeterrent
4
Key requirementsfor contestedcases
55Best Practices &Best Practices &
cost Managementcost Management
66 Q & AQ & A
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Co
ntent
s
1
2
Typology ofFraudulent claim &evaluation forlitigation
Objective
3Litigation as aDeterrent
4
Key requirementsfor contestedcases
55LitigationLitigation
Management & BestManagement & Best
PracticesPractices
66 Q & AQ & A
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Litigation Management :
Strong In-house Claims-Legal Department
Communication in fraudulent cases
Declination letter in complicatedclaims
Reply to legal Notices
Defense Council Selection: Right resourceon the right claim
Legal Spend : What should be, not what is
Litigation Strategies: Right settlement at
the right time
Strong SIU: Close coordination withLegal and concerned department
Investigation should be properlydocumented.
Discourage litigation. Persuadeyour neighbors to compromise
whenever you can. As a peacemaker the lawyer has superioropportunity of being a good
man. There will still be businessenough.
- Abraham Lincoln.
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Best practices:
Declination of claim to be monitored/done by centralised Hub.
To maintain standardisation
Consistency in correspondence with insured
Early and efficient identification of suspect claims and prompt removal from
the normal claims life cycle
Improving knowledge sharing and education Enhancing routine data sharing both across the industry and with
other bodies/organisations
Securing successful criminal prosecutions Better educating the public that fraud is morally unacceptable
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QUESTION & ANSWERQUESTION & ANSWERQUESTION & ANSWERQUESTION & ANSWER
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Thank You