Insurance Article, The Insurance Times 2021, The Insurance Times November 2021

FIGHTING CORRUPTION IN INSURANCE SECTOR

INTRODUCTION   AND   NEED

Every year central and state vigilance commission issue instructions to their  line departments to celebrate vigilance campaign  with full enthusiasm. This mere symbolic tokenism for a short period has been continuing for the past several years without much sustained efforts all along the remaining year. Even for current year, this programme was restricted from fortnight to weeks period only. Does this restrictive exercise yield the desired effects at  the ground level and produce appreciable results palpable by  a common man remains  merely  the fact to be pondered with ?

Addressing this vital issue seriously that is actively eating our nation at all levels assume utmost and urgent importance. Insurance sector is no longer an exception to this socio economic evil, that is equally eating out this important income generating beneficial industry of our country. Counting on accountable functioning of this sector,  public at large expect concrete steps by the government of the day and its regulator , at least to have mass awareness against this menace that produces more importantly a deterrent effect  rather than  punitive results. Zero tolerance policy towards corruption is the need of hour in this non banking financial sector, which  must be fully activated immediately at all levels in its operations and  functioning. Finance Ministry and Insurance Regulator Development  Authority  of  India also need to be serious in its commitment towards implementation of anti corruption measures by regularly sensitizing their employees and insured public continuously throughout the year.

            At least prevention of corruption,  mainly by creating sustained  public awareness campaign,   is an exercise where not only insurance companies and their employees need to be involved but both insured as well as insurer en mass need to play their responsible role for ending up this exercise with a great success.

GENESIS   OF   CORRUPTION

Before combating corruption, it is equally important to understand the genesis of corruption, so as to tackle it more specifically rather than holistically. Normally corruption in our society is perceived to be financial fraud or economic crime. Actually corruption is much more broader term with wide ambit and different ramifications. It ranges from intellectual corruption to physical corruption,  to sexual corruption, to moral corruption, to social corruption, to religious corruption,  to ethnic corruption and to very many types of corruption, all having negative implications on development and progress of our society. Basically corruption comes in to existence either by need or by greed and both these modes are directly related with the mindset of an individual. It is fundamentally connected with moral and ethical values those develop during the upbringing of a person and society only shape up such ethos. Ultimately it results in to a financial mistake having malafide intentions caused for illegal unlawful unethical immoral financial gain for no reasonable cause at the cost of public exchequer.

CONCEPT   OF   CORRUPTION

          Vigilance, only tool of anticorruption,  has two ways in dealing with the fight against corruption. One aspect is punitive of vigilance that deals with creating much needed awareness so as follow thumb rule of ” prevention is better than cure “. It not only creates fear in the mind of corrupt due to horrible end results of corruption but also builds morale against unfair and illegal practices that ultimately lead to self satisfaction of a person. All actions under this exercise are aimed to create deterrent effect in the mind of a common man that creates sense of discipline and responsibility in him. This approach is purely educative, informative and propulsive in nature. It is very common in insurance industry and also produced desired results with little financial burden.

            The other part of vigilance activity is punitive vigilance that provides punishment after committing the crime or acts of commission or omission. It is reformative that corrects human aberrations and serves lesson for others.  Having major drawback that it can be used as a tool for victimization and vindication, so in practice and discharge of duties,  it is less encouraged to preventive vigilance.

IMPLEMENTATION

 Commissions and departments associated with vigilance must be equipped with complete infrastructure and provided with well trained and proven honest manpower who are dedicated towards this vital cause. Stress must be laid on granting them  more  powers and adequate judicial authority rather than empowering them with vast administrative jurisdiction. They need to be more accountable and result oriented so that insuring people have faith and develop confidence in such departments of insurance companies. At the same time, there is need to have proper check and balance on their functioning also, so as not to misuse such departments in office setups for settling personal scores and taking unethical vendetta, that is equally common in insurance industry also.

            All related agencies in insurance set up, fighting corruption must identify the seriousness of this malignancy and establish a connect with the insuring people for not only to expose this menace completely but to generate sufficient knowledge about its consequences especially among the uneducated and rural poor availing insurance facilities. Officers and their concerned  staff associated with vigilance department, who work with limited manpower resources and deficient budgetary funds  instead  strive for creating awareness against corruption,  need to be highly recognised and suitably encouraged. Sufficient examples of discouraging such front runners in the insurance industry exist, which not only reflect  unexpected attitude of higher management but waste public money and in turn conveys the message of inefficient governance of insurance corporate  to the society.

ROLE  OF  PUBLIC

            Role and responsibility of an ordinary employee to create vigilance awareness for eradication of corruption menace can not be undermined. It simply needs to be activated and channelized properly with the co operation of both higher and operational management particularly in an insurance organizational setup, rather than to leave it on vigilance department only.

            Public from all walks of life  need to act as a watch dog on the functioning of insurance companies, be it a government undertaking or a private sector functionary, in order to prevent misuse of our public money and funds raised for good cause of nation building, in order to prevent loss to the exchequer.  Even involving our basic fundamental legal rights through various acts constituted for awareness and knowledge, need to be invoked for exposing such unsocial elements existing in an organization or society.

UNDERWRITING   IN  INSURANCE

To begin with the underwriting of insurance, constituting initial and basic aspect of any insurance operation starting before its actual inception, the way of its business procurement expenses, that is expected to incur before bringing a customer or a client in to its books of operation, seems to be the first baby of corruption in this sector. It serves a lawful way of legitimizing corruption for a corrupt insurer, by not to obliging the pre customer for petty gains  but also  legitimizing its illegal financial gain out of this exercise. Thereafter, the prevailing official system further strengthens the apprehension of legalized corruption by way of allowing payment of commission or brokerage to intermediaries for bringing in such insurance income to its organization. Allowing these prevailing practices of financial benefits in insurance sector, all happening under the nose of government of the day and its regulator, up brings the chances of mal practices that breeds the corruption right from its inception.

Further the loopholes and the safety security principles supposed to be followed during the implementation of insurance proposals through its IT system process, typically creates chances of manipulation, mainly for financial gains of the insured,  at the cost of financial loss of the insurer, ultimately resulting in to unexpected corruption. Employee operators who are IT savy  having  knowledge of cyber manipulations, are most likely prone to such unlawful mal practices, mostly done at the behest of insured and also for its selfish petty gains,  thereby causing heavy  direct and indirect loss to the exchequer and the insurer.

Then misuse of administrative powers by the competent authorities, by way of allowing irrational discounts in premium rates, disallowing ethical costs and not following laid down prudent underwriting procedures, hiddenly in collaboration with insured, enhance the  tendency of corruption. All  such acts of omission and commission for causing financial loss to the organization and undue financial gain to the insured are some of the common acts of corruption that the insurance industry is facing now a days. These intentional lapses committed in connivance with underwriters and business procuring agencies, committed not only as acts of errors but intentional mistakes, are deliberately done  as a part of their corrupt ethos thereby encouraging corruption  in Indian insurance industry. Prudent and safe underwriting has always been a key to the success of any insurance operations and that too corrupt free practices in its implementation finally generate much needed  clean profits that is highly required for the survival of the companies.

CLAIMS  MANAGEMENT  IN  INSURANCE

Claims management in insurance sector, which is also an  integral component of functioning of an insurance organisaton, is no longer an exception to such menace and to illegal corrupt practices, primarily due to involvement of financial transactions and economic considerations .  Such financial frauds and economic crimes in existing system of claims processing in insurance sector,  enlarges  apprehension of corruption, mainly due to involvement of various third party intermediaries during these financial settlements.

Insured at large, without understanding the logics behind timely finalization of their claim amount, tend to inflate it and rely on to make profit out of such exercise, for which it is assumed to  use insurance as mean of their financial gain. This  unlawful tendency prevailing in our society, somehow  generate willingness, sooner or latter,  among our dealing employees,  to indulge in to such illegal practices. Unless not timely and regularly sensitized, succumbing to such evil menace not only take little time but involve an easy process of falling pray  in to this trap. This unwanted  process get easier to execute with the help of intermediates in the form of surveyors, auto dealers, business procurement agencies including agents, brokers, advocates etc.

Initially misguidance and wrong commitments by our marketing  forces, easier way of getting claims that too inflated one by our brokers, personnel petty gains and favours by our surveyors and loss assessors, considering only development  of their own business  by auto tie up dealers at the cost of insurance company, getting enhanced claim amounts by legally misrepresenting in various courts of compensation are some of the main examples of corruption engulfing the process of claims portfolio in insurance sector.

Insurance companies often remain helpless in dealing with their bulk portion of their majority of claims pertaining to motor business , which are settled and disposed by their auto tie up dealers right at dealer point, primarily after obtaining concurrence from surveyors satisfying the insured , without involving insurance companies in the process of finalization of this claim amount, who at the end of the day  simply turn as good pay masters. Similarly, the quantum of remaining claims emanating out of  non motor business portfolio,  are usually settled amicably by the surveyors and the insured itself,  without taking consent of insurance companies, who latter on in connivance with insured, tend to justify and finally recommend such claims amount to the insurer for their payment. Equally judicial partners of insurance companies instead of defending their job provider, again in connivance with those litigants and  claimants approaching prevailing compensation seeking judicial system, by misrepresenting the facts suiting the claimants, finally resulting loss to the exchequer. Allowing such prevailing practices of financial benefit in claims  aspect of insurance sector, all happening under the nose of government of the day and its regulator, breed  the chances of mal practices that ultimately cause  corruption from its  inception of such operations.

Management of insurance claims need to be serious and true in its commitment towards the implementation of anti corruption measures at all levels of its settlement. It must regularly sensitise its claim handlers and intermediaries like agents, brokers, surveyors, arbitrators, advocates besides claims dealing employees and office incharges too,  continuously throughout the year. Vigilance departments need to be involved in reality and need  be supported with complete infrastructure and equipped with well trained honest manpower,  who are sincerely dedicated towards the cause. Stress must be laid on granting them adequate administrative powers rather than empowering them with vast jurisdiction. Such credible caretakers must not succumb to undue tactical pressure of their governors for petty benefits for goofing up the facts that send wrong message to the masses and encourage law breakers.

OTHER   MISCELLANEOUS   CHANNELS

Typical miscellaneous actions prevailing in Indian insurance sector , which can be avoided, also encourage corrupt practices causing loss to the profits of organization and ultimately affects the financial heath of society. Practice of exchange of gifts, on various festive occasions,  primarily created for this purpose only under the garbage of retaining business prospect, involve huge money, both through legitimate and illegal means, end up in corrupt practices due to their  illegal unprocedural procurement. Similarly official tours, which are avoidable, particularly undertaken by the executives of higher management to different places all across the country or even abroad, simply result in the exchange of pleasantries through hidden form of undeclared gifts, also generate a different form of corruption, ultimately causing huge loss to the insurance company.

CONCLUSION

Conclusively all related agencies need to identify the seriousness of this malignancy and establish a connect between the customers and the employees including third part intermediaries for not only to expose this menace completely at the grass root level but to create sufficient knowledge about its consequences. Together with the management,  employees at the operational level and the insured public need to change the mindset, feel consciously responsible and fight for  creating much needed vigilance awareness for the good governance of  our organization which in turn proves beneficial our society, to strongly fight against corruption menace, so as to rebuild our insurance companies for generating profits, at least for their future survival. Compromising with our moral and ethical values by succumbing to this evil for our petty gains, destroy us and our organisation, which we can not afford at any cost under ongoing rapid changing global scenario.

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