Opinion | When fraud gets a new address and a new name: Robin Hood and Bahu Bali
Even as the financialisation of Indian household savings is slow and spasmodic, the great Indian minds have figured out ways to defraud both clients and firms. Retail investors have traditionally been at the receiving end of fraudulent sales and products, but with insurance, the fraud comes against the insurance firms themselves. Both life insurance and distribution firms I spoke to break down life insurance frauds into two categories. One, the Robin Hood fraud. This has the local mastermind who is in cahoots with a cancer (or any other disease that kills) patient, his family, the local doctor and the police. A term life insurance policy, usually for ₹30-50 lakh is bought from three or four life insurance firms each. The premium is a few thousand rupees. The cancer patient dies. The death is shown as an accident, the cancer is undisclosed. The insurance money is collected and shared across all the participants. Robin Hood—because rich insurance firms paid up to all the poor guys—at least that’s what the fraudsters tell themselves.Two, the Bahu Bali fraud. Don’t read this as baahubali, the strong man, read this as daughter-in-law or wife and sacrifice—bahu ki bali—where bali is sacrifice. Several high-value policies are bought for the housewife. She dies in a year. Large life insurance payout collected across the various policies bought. Of course, she doesn’t “die” but is killed. In a mofussil Indian patriarchal town, who raises an eyebrow at another dowry death? The juicy internal rate of return on a term insurance policy of a thousand or two thousand times is triggering fraud and crime. Buy a term cover for ₹10,000 and collect over a crore in a few months. Underwriting, or the due diligence done by the insurance firm at the time of policy issuance, is clearly the weak link, but there are other parts of the system that are not working as well. Insurers speak of the huge damage done by the withdrawal of Aadhaar as the biometric identifier of the life assured. When the courts ruled in favour of privacy, they may have opened the door to insurance fraud a bit wider. Insurers are trying to use big data, data sharing and patterns to identify and curb such frauds. When a certain city has an unusually high claims being filed, or when a married woman with limited income becomes the life assured for a high-value policy, or when the agents seem to bring clients who seem to die quickly, the bells of fraud begin to ring for the firms.