OREANDA-NEWS. October 25, 2010. IC Allianz ROSNO Life organized a special meeting of a workgroup of the Life Insurance Promotion Committee of the Russian Union of Insurers. Bringing together 12 leading participants of the Russian life insurance market, the meeting focused on fraud and loss settlement issues, reported the press-centre of ROSNO.

During the meeting, heads of divisions of the leading insurance companies in charge for security issues and loss settlement procedures shared their practices, examined a number of complicated cases, discussed the techniques used to counter insurance fraudsters, and formulated a concept of uniform approach to resolving this issue.

All participants arrived at the same conclusion: fraud negatively affects not only the financial condition of any particular company, but also the market in general. One way to promote risk-based life insurance is to perform obligations to clients and regularly pay insurance compensations in full. Therefore, insurance companies are absolutely interested in paying insurance compensations. On the other hand, if an insurer uncovers dishonest conduct of some of its insurants, it begins rejecting more loss proofs and makes loss settlement procedure more sophisticated, thus spoiling its business reputation and ultimately denting the image of the entire insurance industry in the eyes of potential clients.

In the 6 months of 2010, the total volume of insurance compensations paid in the insurance market exceeded 360 bn roubles. According to expert estimates, fraud was involved in 10% to 20% of the total volume of the insurance compensations paid in Russia in 2009. The recession persisting in early 2010, coupled with slow recovery of the industrial and financial sectors, induced unscrupulous clients to carry out wrongful acts, and, as experts attending the meeting concluded, the scope of damage inflicted by such clients will likely remain the same.

As for the life insurance market, the experts present at the meeting noted the following: "In general, the present situation in the life insurance market follows the classical insurance trend: as population income is falling, fraud is spreading. Yet, since the life insurance market is much less developed, with its penetration level not nearly as high as in, for example, motor insurance, the quantity of the fraud cases in this segment is much lower in absolute terms. Anyway, the life insurance market has seen insurance compensations worth 10 million roubles per one insured accident and even larger amounts".

Mr. Viktor Dubrovin, head of the Legal Support and Security Department of IC Allianz ROSNO Life, also acting as a meeting moderator, told: "Insurance fraud is evolving in line with the market dynamics. Though slowly, life insurance sector is picking up steam. The launch of new insurance products adapted to the needs of the general public, along with the growing rate of additional investment yield guaranteeing capital gains — all these factors have attracted not only good-faith clients who realized the importance of protecting their financial wellbeing, but certain scam artists as well.

The analysis of fraud cases has uncovered two major categories of wrongdoers. We can call them "spontaneous" and "deliberate" for convenience. The first category includes the clients who had entered insurance contracts with no intention to commit any wrongdoing. However, influenced by certain circumstances making them short of cash, they decide to violate the law.

The second group is represented by professional fraudsters. As a rule, they use two techniques: document forgery and inflicting self-injuries to claim compensations. Fraudsters group together; each of such criminal groups includes a lawyer, a doctor, and other professionals able to facilitate their fraud.

For example, late last year a criminal "brigade" was uncovered in Southern Federal Okrug. They filled the eyes with a special tincture, then procured a medical certificate of corneal burn and submitted the relevant documents to their insurance company. The fraudsters exposed themselves by applying for the same compensation to another insurance company. Interestingly, the insurant and the doctor were the same individuals as in the first case. Using the forgery scheme, fraudsters usually present previously purchased documents certifying fractures or displacements. Unfortunately, the fraudsters operating in the life insurance market may be exposed and punished only if they make mistakes. One of such mistakes: the alleged victim submits documents certifying his or her fracture, but at the second medical examination doctors see no trace of such injury.

Stopping the fraudulent offensive on the life insurance market participants is possible. But this requires achievement of three key objectives. The primary objective is to create a common information exchange infrastructure, which would enable sharing specific information on suspicious cases, procuring advice from experts working for other companies, and promptly obtaining additional information on certain requests. In this respect, we count on the vast expertise and professionalism of our colleagues from the Russian Union of Motor Insurers.

Secondly, the critical objective is to establish solid professional interaction with medical institutions who are authorized and competent in uncovering, for example, forged documents, and who are able to provide reliable advice in complicated cases.

Thirdly, an important role in arresting the fraud wave can be played by popularization of law-abiding behavior. The results of surveys conducted by many research agencies show that our compatriots believe, for whatever reason, that deceiving an insurance company into paying an insurance compensation is not a serious crime. In fact, the negative aspects of such crimes are reaped by the insurer’s employees, thus unfairly deteriorating the position of good-faith insurants. We hope that mass media and social networks will support us in achieving these objectives."