Insurers Crack Down on Motor Third-Party Fraud in India

General insurers are significantly ramping up their efforts to combat fraudulent motor third-party insurance claims. This intensified crackdown addresses both rising compensation payouts and a growing number of uninsured vehicles plaguing the segment.

The push for stronger action against fraud follows a recent Madras High Court order. This judicial directive specifically mandated the establishment of district-level special investigation teams across Tamil Nadu.

Madras High Court Directives Drive Action

• Go Digit General Insurance secured the court order on July 29.
• Teams are tasked with probing claims involving fake accidents and forged documents.
• Investigations must cover fabricated injuries and false medical reports and bills.
• Police are directed to collect relevant evidence, including call detail records.
• Criminal proceedings are to be initiated against those found responsible.
• Departmental action is ordered against officials facilitating or failing to prevent fraudulent claims.

The issue of motor third-party fraud is now a major concern across the insurance industry. This segment already contends with significant pressure from escalating claims costs.

Krishnamoorthy Rao, MD and CEO of Generali Central Insurance, stated that this fraud could become an industry-wide problem. He highlighted the challenge of higher compensation awards and a surge in uninsured vehicles.

Industry-Wide Challenge for Motor Insurance

• Alleged conversion of non-road traffic accident claims into motor accident claims.
• Increased number of claims being brought under motor third-party insurance.
• Resultant addition to insurers’ overall liabilities.

Key Numbers: Supreme Court’s Impact on Payouts

• New compensation head for loss of domestic care introduced by Supreme Court.
• Compensation based on a monthly income of Rs 30,000.
• Periodic revisions for inflation and socio-economic changes apply.
• Previously, compensation for this aspect was linked to a multiple of the victim’s income.

These higher court awards mean genuine claims also result in larger payouts for insurers. Consequently, the aggressive stance in Tamil Nadu, involving police investigations and criminal action, signals a broader industry shift against pervasive motor third-party fraud.