How to Spot and Avoid Common Insurance Scams During the Claims Process

We’ve all had unexpected disasters, from a sudden house repair to something major like a car accident, or an unexpected medical bill, and suddenly, you’re plunged into the confusing world of insurance claims. These are the moments we rely on our insurance policies to pull us through.

But just as you're about to catch your breath, there’s another obstacle lurking in the shadows — insurance scams.

1. What are insurance scams?

The first question in anyone’s mind would be what exactly is an insurance scam or insurance fraud?

In India, the insurance sector is heavily regulated by the Insurance Regulatory and Development Authority of India (IRDAI). Despite these regulations, scammers find loopholes in the system to exploit policyholders.

Insurance scams can come from different angles — fake agents, inflated claims, or mis-sold insurance policies— but they all share one goal: to take advantage of your situation. Unfortunately, insurance fraudsters are skilled at exploiting vulnerable situations.

2. What are some common insurance scams?

Let’s break down some of the most common scams that fraudsters use during the claims process. Once you're aware of these tactics, spotting them becomes much easier.

● Inflated Repair Costs

“I’ll handle the insurance paperwork — No need to worry about a thing” Sounds convenient, right? Some contractors inflate the repair costs and pocket the extra cash, leaving you with an inflated bill and an awkward conversation with your insurer.

● Fake Invoices and Receipts

Scammers may provide fake invoices for work that was never done, or they’ll charge you for parts that were never replaced. These inflated invoices can lead to you unknowingly submitting fraudulent claims, which could harm your standing with your insurance company.

● Health Insurance Fraud

Identity scams have a major impact on both the healthcare and auto insurance sectors, with fraudsters stealing personal information of policyholders to purchase insurance policies or file bogus claims under the victim’s name.

● Mis-selling of insurance policy

Mis-selling occurs when insurance agents or companies provide misleading information, pressuring customers into buying unsuitable policies, often leading to financial losses and inadequate coverage.

● Unjust Claim Rejections

Some companies deny claims based on hidden exclusions or small print that wasn’t clearly communicated when you signed up. For example, an insurer might reject your health insurance claim by saying a certain treatment wasn’t covered, even though it should be based on your policy.

● Delaying the Claims Process

Insurance companies might drag their feet, asking for endless documents or making repeated requests for information that’s already been provided. These delaying tactics are often used to frustrate policyholders into dropping their claims altogether.

● Underpaying Claims

Another tactic is underpayment—where the insurer accepts your claim but offers a settlement far below what’s fair. They might downplay the extent of damage to your vehicle or home, or undervalue medical expenses, leaving you to cover the shortfall out of your own pocket. You’re left wondering why the payout is so low, but by then, you're exhausted from the process.

● Forcing Legal Disputes

In more extreme cases, insurance companies may push policyholders into lengthy legal battles, knowing that the average person doesn’t have the resources to fight back, they rely on the fact that many policyholders will give up before seeing the process through.

3. Protecting Yourself from Insurance Scams

● Keep Detailed Records
● Verify All Documentation
● Limit Sharing of Personal Information
● Get Multiple Repair Estimates
● Report Suspicious Activity Immediately

4. What to Do If You’ve Been Scammed

Unfortunately, even the best efforts can’t always prevent a scam. In the unfortunate case you find yourself stuck in a scam, seek legal advice without hesitation. In cases of severe fraud, it may be beneficial to consult a Subject Matter Expert like Bima Seva Kendra to guide you through the next steps and help you recover any financial losses. By consulting with a trusted expert, you add an extra layer of protection, ensuring that you’re not alone in dealing with the claims process.

Conclusion

Filing an insurance claim is often a stressful process, but it doesn’t have to be a nightmare. An informed decision under the guidance of trusting subject matter experts, and recognizing the red flags of insurance scams can protect you and your finances. Remember, vigilance and caution are your best defences. Stay sharp, ask the right questions, and you’ll navigate the insurance claims process smoothly and scam-free.