IRDAI is considering a proposal to make insurance frauds a parameter for calculating credit scores in an attempt to put a lid on the increase in such activity.
The proposal, which is a part of the recommendations made by a working group formed by IRDAI and the General Insurance Council, suggests that insurance frauds should feature when the risk profiles of individuals are evaluated and should be used to calculate their credit scores.
A poor credit score can deprive a person of financial services such as loans and credit cards, and deter him from indulging in fraud.
While making a case for this proposal, the working group said a fraud attempt on an insurance company can be replicated with other financial institutions, too.
The proposal is being considered by the insurance regulator, as such frauds have been costing insurers dearly, with some estimates pegging their losses at over Rs. 45,000 crore a year. This has prompted insurers to jack up premiums for customers to offset such losses, the working group has said.
With more insurance penetration in the country, and the government’s push to insure every citizen, fraudulent and suspicious activities have risen phenomenally, and need intervention, the group added.