Frauds in Insurance

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EXECUTIVE SUMMARY

“Rising frauds lead to greater operational threat.”

Insurance is one of the tools for risk management that aims at reducing the risk on the day-to-day life of individuals, organisation and society. At the same time, it should also be appreciated that insurance cannot be utilised as a risk free tool for all types of situations. Insurance provides risk management solutions to many situations that fall within the competence of human judgement and managerial skills.

Insurance is very important in today’s world there are number risk which people face in their day-to-day life. The different types of insurance are life insurance, health insurance, automobile insurance, and property insurance. These are the most common types of insurance. Other types of insurance include terrorism insurance, key man insurance etc.

As there are number of advantages in taking an insurance policy, it is also associated with many risks. There are number of frauds taking place in the insurance sector. People have to be very cautious while taking an insurance policy.

Insurance is a federal subject in India. It is a subject matter of solicitation. The legislations that deal with insurance business in India are Insurance Act, 1938 and Insurance Regulatory & Development Authority Act (IRDA), 1999.

The hypothesis is that THIS PROJECT SCANS THE RISKY NATURE OF INSURANCE WITH REFERENCE TO VARIOUS TYPES OF TRANSACTIONS AND THEIR VULNERABILITY TO FRAUD.

CONCEPT OF INSURANCE
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. There are number of frauds taking place in the insurance industry. Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer. Insurance fraud poses a very significant problem, and governments and other organizations are making efforts to deter such activities. On the one hand, human life is subject to various risks—risk of death or disability due to natural or accidental causes. Humans are also prone to diseases, the treatment of which may involve huge expenditure. On the other hand, property owned by man is exposed to various hazards, natural and man-made. It is important for all to understand the various products that life and general insurance companies offer before they make a choice as to the product they want to buy. As per regulations, insurers have to give the various features of the products at the point of sale. The insured should also go through the various terms and conditions of the products and understand what they have bought and met their insurance needs. They ought to understand the claim procedures so that they know what to do in the event of a loss. The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums. HISTORY OF INSURANCE

Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. Together with banking services, it contributes to about 7 per cent to the...
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