How to Avoid Common Insurance Frauds in India – Real Cases Explained

• 

  By Gujju Ticks

  21 May, 2025

Introduction

When it comes to protecting your financial future, insurance is essential. These policies provide peace of mind, whether they are for health, life, home, or auto insurance. On the other hand, fraud cases have sharply increased in tandem with India's growing insurance demand. Insurance fraud in India is growing to be a significant issue for both policyholders and insurers, ranging from phony agents to falsified claims.

This blog will explain how insurance scams operate, give you real-world examples of insurance fraud, and—most importantly—show you how to avoid falling victim.

What Is Insurance Fraud?

When someone purposefully misleads an insurance company to get money they don't deserve, it's known as insurance fraud. This can take many different forms, such as impersonation, fabricated documents, false claims, or phony policies.

The Insurance Regulatory and Development Authority of India (IRDAI) estimates that fraud costs the Indian insurance sector thousands of crores annually.

Types of Insurance Frauds in India

1. Fake Insurance Agents

Fake agents selling fictitious policies is one of the most prevalent scams in India. These scammers frequently visit homes or workplaces with forged identity cards and promise large returns or bonus plans.

Real Case:

More than 100 people were tricked by a man in Gujarat who claimed to be from LIC by offering phony "bonus clearance" plans. In the mistaken belief that they were purchasing new policies or renewing existing ones, victims paid lakhs of rupees. Only after policyholders checked with LIC did the fraud become apparent.

How to avoid it:

• Always check the agent’s IRDAI license.

• Buy policies directly from company websites or verified agents.

• Use the official IRDAI agent verification portal.

2. Health Insurance Scam via Hospitals

It has been discovered that certain private hospitals collude with patients to submit fictitious health insurance claims. They overcharge or admit people who aren't ill in order to get insurance.

Real Case:

After looking into several claims from a specific hospital, a Mumbai health insurance company discovered that various patients were using the same set of illnesses to make exorbitant claims. During a routine audit, the fraud was found.

How to avoid it:

• Choose reputed hospitals tied up with your insurer.

• Keep all medical bills and prescriptions.

• Do not allow hospitals to "adjust" medical history for easier claim approval.

3. Car Insurance Fraud

To get money from auto insurance companies, some people stage accidents or purposefully damage their cars.

Real Case:

A man in Surat filed a ₹4 lakh FIR and claimed that his car had been stolen. However, the police found that he had sold the car to a person in a different city and had staged the theft to obtain the money.

How to avoid it:

• Always file a police report immediately after genuine accidents.

• Use dashcams if possible for proof.

• Never provide incorrect information on claims – it's a criminal offense.

4. Fake Insurance Companies

As the use of digital media increases, scammers develop phony websites and applications that mimic legitimate insurance providers. They advertise "cheap policies" with high returns or no benefits for medical tests online.

Real Case:

In 2023, a group in Hyderabad was discovered operating a fraudulent website that imitated a well-known insurance provider. They disappeared after using UPI to collect premium payments. More than 200 victims experienced financial loss.

How to avoid it:

• Check the company's IRDAI registration.

• Visit the official website through Google Search or directly by URL.

• Never pay premiums through unknown UPI links or personal bank accounts.

5. Phishing & OTP Fraud

Phishing emails or messages requesting OTPs or claiming policy updates are sent by scammers. The fraud starts as soon as a user divulges banking or personal information.

Real Case:

A woman in Ahmedabad was contacted to inform her that her LIC policy was about to expire. In order to "renew the policy," she was requested to provide her Aadhaar-linked OTP. Soon after, ₹75,000 was taken out of her bank account.

How to avoid it:

• Never share OTPs or PINs over the phone.

• Official insurers never ask for sensitive data via calls or messages.

• Report suspicious activity to your insurer and local cyber cell.

Tips to Protect Yourself from Insurance Fraud

1. Buy from Reputed Sources: Stick to official websites or verified agents.

2. Verify Everything: Use the IRDAI website to check company and agent registration.

3. Document Everything: Keep records of payments, receipts, and conversations.

4. Stay Educated: Learn about policy terms and claim processes.

5. Use Secure Payments: Avoid cash or UPI payments to individuals. Use official gateways.

What To Do If You Suspect Fraud?

• Contact Your Insurer: Report the incident immediately.

• File a Police Complaint: Fraud is a criminal offense.

• Contact IRDAI: You can lodge a complaint via IRDAI Grievance Portal.

• Inform Your Bank: If payment fraud occurred, alert your bank to freeze transactions.

Final Thoughts

In India, insurance fraud is becoming a bigger problem, particularly since scammers can now more easily reach victims through digital platforms. Awareness is still the best defense against fraud, even though the government and insurance companies are making great efforts to prevent it through audits, regulations, and AI-based detection tools.

Cases from real life demonstrate that anyone can be targeted, whether they live in Delhi, Surat, Rajkot, or Mumbai. Therefore, be cautious at all times, double-check your sources, and never give out personal information carelessly.

Protect your hard-earned money and secure your family’s future by making informed and safe insurance decisions.