Defining fraud and abuse - Workshop Group 1 presentation

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Group I
Universal Definition of Fraud/Abuse/Leakage, key
players in perpetrating fraud, roles controls.
The key purpose is to define exact problem and its root
cause so that it can be effectively addressed
Fraud
Any act committed
 with the intent to cheat ,
 obtain some benefit or advantage to which they are not
otherwise entitled or
 someone knowingly denies some benefit that is due and
to which some one is entitled
Abuse
 Misuse of position to gain a higher benefit.
 Overcharging for services that are not required or
rendered.
Leakage
Resultant losses due to inefficient processes which
could be intentional or non intentional.
Specific Contribution in detail to each type
Sales:/marketing team
Fraud
Abuse
Leakage
by
Premium Siphoning
√
Intentional Non Disclosure
√
Mis selling
√
Phantom Policies
√
Assisting/Lobbying and
pressuring for fake claims
√
Impersonation
√
Kickback
√
Incomplete Application form
√
√
√
Underwriting
Lapses/Product
features
Fraud
Accepting Fake
documents
√
Collusion and
Underquoting
Backdating
Abuse
Leakage
√
√
√
CB leakage due to
non reporting of
previous years
claims
√
Different stand by
IC on standard
exclusions/Non
Medicals
√
Ambiguity in
policy wordings
√
Customer’s Lack
of
Awareness/delib
erate acts
Fraud
Fake claims
√
Impersonation
√
Opting tertiary
care centre for
primary care
services
Hiding
information
Incomplete
address
Abuse
Leakage
√
√
√
Health care
Provider
Practises
Fraud
Fake claims
√
Abuse
Inflation
√
Unbundling of
services
√
Manipulation of
bills/diagnosis to
suit the
admissibility
Photo ID
Leakage
√
√
Controls
 Training
 Spreading awareness to agents, customers and service
providers
 Vigilant Underwriting and claims management
 Efficient recovery mechanism
 Strict action -Expose and publish
 Void Policy
 Litigation
Fraud -Defined
The word ‘fraud’ is not defined in Indian Penal Code; instead what
constitutes doing a thing fraudulently is explained.
The Indian Penal Code
There is no separate legislation dealing with fraud as in the United Kingdom
or the USA. Fraudulent activities are covered by the Indian Penal on 25
defines the expression
‘fraudulently’ – ‘a person is said to do a thing fraudulently if he does that
with intent to defraud but not otherwise’. The expression fraudulently
occurs in Sections 206, 207, 208, 242, 246, 247, 252, 253, 261, 262, 263 and
Sections 421 to 424.
Sections 24 and 23 define expressions ‘dishonestly’ and ‘wrongful
gain and wrongful loss. ‘Wrongful gain’ is gain by unlawful
means of property which the person gaining is not legally
entitled. ‘Wrongful loss’ is the loss by unlawful means of
property to which the person losing it is legally entitled.
Whoever does anything with the intention of causing wrongful
gain to one person or wrongful loss to another person, is said to
do that thing ‘dishonestly’.
Indian Penal Code – Fraud recognition
Indian Penal Code recognizes the following acts as fraud:
 a. Impersonation
 b. Counterfeiting
 c. Wrong weighing and measurement
 d. Misappropriation
 e. Criminal breach of trust
 f. Cheating
 g. Dishonest dealing in property
 h. Mischief
 i. Forgery
 j. Falsification
 k. Possessing stolen property
 l. Concealment
Leakage
 Claim leakage represents the difference between
the amount actually paid on claim
 What should have been paid.
 It is the money lost during the claim settlement
process.
How to contain Leakages
 Speed and efficiency.
 Exception handling
 Establish business rules
 Increase data integrity
 Data mining.
 Trend analysis.
DEFINITION OF FRAUD
Fraud is defined as "any behavior by which one person
intends to gain a dishonest advantage over another".
In other words , fraud is an act or omission which is intended
to cause wrongful gain to one person
and wrongful loss to the other, either by way of concealment
of facts or otherwise.
Fraud is defined u/s 421 of the Indian Penal Code and u/s 17
of the Indian Contract Act.
Article Source: http://EzineArticles.com/772623
Definition of Fraud
Thus essential elements of frauds are:
1. There must be a representation and assertion;
2. It must relate to a fact;
3. It must be with the knowledge that it is false or
without belief in its truth; and
4. It must induce another to act upon the assertion
in question or to do or not to do certain act.
Definition of Fraud as per Indian
Contract Act
 Sec-17 OF Indian contract Act ,1872
 Fraud means and includes any of the following
acts committed by a party to a contract or with
his connivance or by his agent ,with the intent
to deceive another party thereto or his agent or
to induce him to enter into the contract
Fraud
 The suggestions as to the fact ,of that which is not
true, by one who does not believe it to be true.
 Active concealment by one who is having
knowledge of the fact
 A promise made with no intention to perform it
 Any act fitted to deceive
 Act or omission declared by the law to be
fraudulent
Fraud – its essentials
 Must be committed with the intention to deceive
 Must actually deceive the other person- sec-19 –A
fraud which did not cause the consent to a contract
of the party on whom such fraud was practised,
doesn't render the contract voidable- in other
words if the consent of the party is not caused by
fraud ,he or she cannot complain of it.
 Must be committed by the parties to the contract.
Fraud
 Mere silence is not fraud- sec-17 mere silence as to
facts likely to affect the willingness of a person to
enter into a contract is not fraud. But silence can
amount to fraud when there is either duty to speak
or where silence is equivalent to speech – fiduciary
relationship – insurance is a contract of absolute
good faith- where there is duty to disclose –silence
amounts to fraud. Half truth also amounts to fraud
What constitutes fraud
 1.False statement of fact
 2. Active concealment of fact a. there is a concealment of fact
 b. it is active in the sense that all efforts made to
conceal it
 c. and it has been made by the party who has the
knowledge of it.
 Effect –voidable
 Remedy – rescind or affirm
 Health insurance fraud is described as an intentional act of
deceiving, concealing, or misrepresenting information that results in
healthcare benefits being paid illegimately to an individual or group.
 Fraud claims are wide-ranging, from misrepresented services,
services not rendered and services rendered to 'rented' patients, to a
broad spectrum of revenue-enhancement mechanisms
 The estimated number of ‘Fraud & Abuse’ cases in Indian healthcare
insurance is estimated at around 25-40% of total claims.
 The main purpose of fraud is financial gain.
 As per one report, the healthcare insurance in India may be losing
approximately 1000 crore INR under Fraud & Abuse per annum
Misrepresentation
 Sec-18 of Indian Contract Act-I. The positive assertion ; in a
manner not warranted by the information of person
making it ,of that which is not true , though he believes it
to be true. 2. Any breach of duty which without an intent to
deceive ,gains an advantage to the person committing it ,or
anyone claiming under him ,by misleading another to his
prejudice or to the prejudice of anyone claiming under him
.3. Causing ,however, innocently a party to an agreement to
make a mistake as to the substance of the thing which is
the subject of the agreement.
Misrepresentation
 Misrepresentation is an innocent misstatement of
facts – positive false statement made without any
basis of information ; a breach of duty which
brings advantage to the person committing it ;
inducement of mistake about the subject matter
 Legal rules for misrepresentation- 1. It must be of
material facts- a mere expression of one’s opinion
is not a statement of facts
Thank You
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