Common Motor Insurance Frauds & How to Detect Them

Insurance is a promise of financial protection—but unfortunately, frauds are a major challenge. In motor insurance, fraud accounts for a significant portion of claim payouts worldwide. According to the IC-72 study text, fraud can be external (by customers/claimants) or internal (with collusion of intermediaries/insiders).

For sales managers and agents, understanding these frauds helps you identify red flags early and protect both the company and genuine customers.

🚨 Types of Motor Insurance Frauds

1. Conversion of Non-Road Accidents into Road Accidents

Incidents like falls, industrial accidents, or domestic injuries are presented as road accidents to claim compensation.
👉 Example: A factory worker injured on duty is falsely shown as a road accident victim for a third-party claim.

2. Conversion of Medical Cases for Wrongful Gain

Pre-existing illnesses or unrelated medical issues are linked to road accidents.
👉 Example: A person with old fractures claims they occurred in a motor accident.

3. Frauds in Road Accidents

Includes staged collisions, use of fake witnesses, inflated injury certificates, or filing false FIRs.
👉 Example: Two vehicles deliberately collide at low speed, but the claim report shows heavy damages and multiple injuries.

4. Multiple Insurance / Multiple Claims

A single vehicle insured with multiple insurers → same accident reported to all.
👉 Example: A truck insured with two companies claims accident losses from both insurers.

5. Underwriting Frauds

Insurance sought after accident occurrence using backdated or forged cover notes.
👉 Example: A damaged car is insured two days after the accident with manipulated papers.

6. False & Fabricated Claims

Claims supported with fake bills, forged RC/DL, or manipulated hospital records.
👉 Example: Inflated garage bills include repair of old scratches along with accident damages.

🔎 How to Detect Motor Insurance Frauds

The IC-72 document highlights several fraud detection measures:

Appointment of Investigators – Independent investigators verify accident facts.
Use of Documents – FIR, Panchnama, seizure reports, and Motor Vehicle Inspector (MVI) reports cross-checked.
Identity Checks – Photographs of victim and witness verification.
Hospital Record Verification – Ensuring treatment matches the nature of accident injury.
Modern Tools – Videography, geotagging, forensic audit of repair bills.
Cross-linking OD & TP Files – Ensures facts match in both Own Damage and Third-Party claims.
Rotation of Staff & Surveyors – Prevents long-term collusion with fraud networks.
Legal Remedies – Tribunals and courts (per Supreme Court rulings) can recall/withdraw awards tainted by fraud .

✅ Example Case Study

A claimant files for ₹5 lakh third-party compensation, claiming permanent disability.
Investigation reveals the person was already under medical treatment before the accident.
Hospital bills were fabricated.
Claim was dismissed, and police were directed to take action against the claimant .

💡 Sales & Agent Tips

Educate Clients – Be transparent about exclusions and claim requirements.
Spot Red Flags – Late policy purchases, inconsistent accident details, multiple claims.
Promote Honest Practices – Stress that fraud = claim rejection + legal action.
Assist in Genuine Claims – Guide clients with correct documents to speed settlement and avoid suspicion.

🎯 Conclusion

Motor insurance fraud harms not just insurers, but all policyholders—because higher fraud means higher premiums for everyone. With vigilance, proper documentation, and proactive investigation, fraudulent claims can be stopped, ensuring genuine customers get the protection they deserve.

👉 Pitch Line for Customers:
“Insurance fraud increases your premium. Stay honest, stay protected—and we’ll make sure your claims are hassle-free.”