Use of Legal Measures to Handle Unreasonable Claim Demands,Exaggerated and Fraudulent Claims

8/13/2019 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

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2


Objective


4




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


Objective


4




66 Q & AQ & A


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Co

ntent

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Objective


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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

Use of Legal Measures to Handle Unreasonable Claim Demands,Exaggerated and Fraudulent Claims

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