High Return Insurance Policies Scam: Here's How To Stay Safe Against This Cyber Fraud

Insurance is a crucial financial tool for many, which comes in handy at the time of dire need. But it has also become a seeding ground for many fraudsters. A retired bank manager in Pune recently lost around Rs 2.22 crore to a cyber scam wherein fraudsters persuaded her to purchase multiple insurance policies with the false promise of high maturity benefits.

At first, it looked like a once-in-a-lifetime opportunity. That is how most scammers get successful at frauding people. But over the span of several months, scammers posing as government officials, regulators, and financial experts managed to convince her to keep sending money with the promise of lucrative insurance policy returns. By the time the victim realised the truth, his life savings were gone.

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The Trap: How It All Began

It all started at the end of 2023. The victim began receiving phone calls from individuals who claimed to be representatives of major financial institutions and regulatory bodies, Irdai, NPCI, and even the Ministry of Finance.

The scammers talked to the victim professionally in a very well-informed and highly convincing tone. They used official-sounding jargon and referenced well-known names while claiming that they were acting under the directives of government officials.

How Did Scammers Use Insurance As A Fraud?

The pitch was pretty simple; they told her that the victim had an ‘exclusive’ chance to invest in insurance policies with exceptionally high maturity benefits. Given her background in banking, the victim was cautious at first, however, the scammers had done their homework.

They sent her documents and emails with official-looking seals and even gave references to legitimate government programs to bolster their credibility.

Ultimately, the scammers requested money in the name of ‘policy payments.’ They convinced the victim to invest a total of Rs 1 lakh into what she believed were legitimate insurance policies.

Post receiving the same, they added charges related to GST, TDS, transaction fees, verification charges, and NOC fees. During the process, when the victim would hesitate, the scammers justified their payment reasons as legitimate.

The victim was fooled into thinking she was talking to officials from different departments who assured her that everything was above board and urged her to make the payment quickly to avoid missing out on the massive returns.

The scammers operated under 19 different identities ensuring that the voices could not be tied to the fraud.

As the scam went on, the victim got calls from purported officials who claimed her previous payments had been diverted to some fraudulent accounts. To recover those funds, she was asked to make more payments, causing her to lose even more money.

The victim, ultimately, ended up losing her savings while being threatened and manipulated by the scammers.

You may think this scam is unique or an isolated incident, however, that’s not the case. Insurance frauds are very common and easy for people to fall into under the guise of ‘high returns’.

The September 2024 edition of Outlook Money wrote extensively on ‘26 Spiels You Should Not Fall For’ ranging from insurance to other kinds of frauds.

‘Insurance As SIPs’

Some scammers even try selling insurance policies like Systematic Investment Plans (SIPs), guaranteeing returns on SIPs with a health or life cover as an added benefit.

There are 2-3 aspects of such a sales pitch that you should know about;

- First, SIP is a term that usually refers to mutual funds or stock market investments. So, when there is additional insurance being promised along with it, it’s most likely an insurance plan with a monthly or quarterly premium.

- Second, SIPs, being related to stocks or mutual funds, are subject to market risks, and therefore, cannot offer any guaranteed returns.

- Adding health or life cover to SIPs may seem like an attractive package, however, it is important to know these are two separate financial products with their own risk profiles.