Insurance Fraud: Why The Real Battle Begins Before A Claim Is Filed

The insurance regulator’s Insurance Fraud Monitoring Framework Guidelines, 2025, which took effect on April 1, 2026, have pushed fraud checks upstream of the claims process by mandating due diligence at onboarding, recruitment and vendor engagement, along with regularly updated red-flag indicators that evolve with emerging fraud patterns. Experts say the Insurance Regulatory and Development Authority of India (Irdai) is, in many ways, formalising practices that industry professionals have long advocated.

“Insurance fraud does not always begin at the claims stage. It can enter much earlier - during onboarding, agent hiring, vendor empanelment, document submission, contact-detail changes, or policy surrender requests,” says Karan Bhatty, founder of Millow, a due-diligence technology firm. 

Debankur Biswas, chief operating officer at Plum, a group health insurtech, says the shift reflects a broader focus on protecting policyholders. “Every fraudulent claim is ultimately paid for by honest policyholders through higher premiums. That makes due diligence a form of consumer protection. Insurers that get it right are moving those checks to the beginning of the customer relationship rather than waiting until a claim is filed,” he adds.

The surest place to stop that money leaking is before a policy is written, which is at the point of disclosure. Every insurance conversation should ideally begin with a health assessment.

When applicants actually understand their own health instead of guessing at a form, underwriting is cleaner and disputes are fewer. That means being precise about health history: documenting past conditions, diagnoses, and treatments accurately rather than omitting them to lower a premium. Non-disclosure is the single most common reason genuine claims get rejected.

The screening is about to widen. Says Biswas: “Credit behaviour may soon play a part, too. Indian health insurers don’t yet routinely use credit data, but the General Insurance Council began work in 2025 on a CIBIL-like risk score for the sector, designed to make it harder for repeat fraudsters to obtain cover. Correlating financial history with claims behaviour is still developing here, but will make for a great way to filter bad actors.”

The anxiety is not India’s alone. The RGA Global Claims Fraud Survey, drawing on insurers worldwide, ranked fraud the top concern for life and health insurers globally, with AI sharpening both the deception and the defence.

If individual policies are gamed on identity, group cover is gamed on design. “Group health is easier to misuse because it covers pre-existing diseases from day one and prices off larger risk pools,” Biswas says.

The leakage is significant, with industry estimates putting India’s annual health insurance fraud losses at Rs 8,000-10,000 crore.

What that vigilance guards against is often strikingly low-tech. Bhatty offers an example from a senior branch-level professional at a large private life insurer in north India. 

“Two people from the same village had the same name and father’s name. One was the genuine policyholder, while the other allegedly managed to change contact details, obtain documents and cash out the policy before the real policyholder returned,” he says.

A second case, relayed by an area manager at a large general insurance company, was costlier still. “A person visited a branch claiming to be the policyholder's son and asked what documents were needed to surrender a unit-linked policy. He returned the next day with a bank statement, Permanent Account Number (PAN) card, indemnity bond and surrender form, claiming the original policy papers were missing. Since the signatures appeared to match, around Rs 35 lakh was released. Six months later, the real policyholder discovered that the policy had already been surrendered. The investigation later found that the documents, including the bank statement, were fake.”

The claim, in other words, was never where the fraud began. It was only where it got noticed. And that is the whole argument for moving the scrutiny forward. These examples show why due diligence must go beyond basic document matching.

Bhatty calls for stronger checks at critical trigger points, such as contact changes, nominee updates, policy surrender, high-value withdrawals and claims. “Enhanced identity checks, live verification, source validation, anti-forgery checks, field intelligence and human review can help detect fraud before the money leaves the system, without creating unnecessary friction for genuine policyholders,” he further says.