Even though the Indian Insurance Act or the Indian Penal Code does not have specific laws for 'insurance fraud,' it has been known to occur in India, either by policyholders, intermediaries or employees of the insurance provider. When insurance fraud occurs in India, the sections of the IPC that deal with fraudulent acts and forgery are applied. 

Let us understand what exactly comes under the purview of health insurance claims fraud.

What is insurance fraud?

The Insurance Regulatory and Development Authority of India (IRDAI) used and quoted the definition of insurance fraud as said by the International Association of Insurance Supervisors (IAIS), which is "an act or omission intended to gain dishonest or unlawful advantage for a party committing the fraud or for other related parties."

Types of Fraud

The IRDAI has classified insurance fraud into the following three categories:

  • The policyholder or Claims Fraud
    This can be defined as a fraudulent activity carried out by the policyholder against the insurance company either during the purchase of the policy or during executions of the policy. This could include providing inaccurate information in the application form or not disclosing information relating to health status or income. Frauds committed at the time of making a claim also fall under this category. 

  • Internal Fraud
    When the fraud committed is carried out by a staff member or employee of the insurance company against the insurance company themselves, it can be termed internal fraud. This can include misappropriation of funds and other frauds. 

  • Intermediary Fraud
    When an agent or intermediary commits fraud against either the insurance company or the insured policyholder, it is called intermediary fraud. 

Most Common Claims Related Frauds

Most frauds are committed during the claims process by policyholders. The following are some common examples of Policyholder or Claims Frauds.

  • Hiding Pre-existing Diseases and Conditions
    This is the most common health insurance fraud. Policy buyers tend to withhold information related to their pre-existing conditions in their application forms. Since there is a waiting period of two or three years for pre-existing conditions and the premium may also be higher, applicants tend to hide this fact. They can also manipulate the results of the pre-policy health evaluation to conceal their existing ailments. 

  • Forged Documents
    Health insurance buyer also sometimes submit fake documents to gain an advantage. It is a well-known fact that insurers tend to offer lower premiums to younger applicants. Hence, policy buyers may submit fake proof of age to conceal their actual age. 

  • Duplicate Bills During Claim
    A health insurance policy works by paying out medical expenses incurred by the policyholder due to illness or surgery. When the policyholder incurs no such expenses, they fabricate medical bills to gain a profit via the insurance claim. This is also a common insurance fraud in India. Sometimes, instead of submitting fake bills, policyholders may also submit inflated bills to gain profits. 

  • Using Multiple Policies
    It is legal to purchase multiple health insurance policies and use a combination of both to pay for your medical bills. However, policyholders sometimes claim the same expenses on both of their policies, thus getting a pay-out twice and making a profit. The correct way to use more than one policy is to inform your insurer about the existence of all your policies at the time of claim. 


Health insurance fraud can occur to anyone if they're not too careful. Not just insurers but policyholders themselves can be the victim of insurance fraud by intermediaries. Sometimes, intermediaries may be committing fraud against an insurer and using policy applicants without their knowledge. Therefore, one must be aware of such fraudulent acts and steer clear of such situations that can put them in tight spots.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.