SC directs states to set up SITs to probe suspected fraudulent insurance claims

NEW DELHI: The Supreme Court has directed all states to constitute dedicated Special Investigation Teams (SITs) to probe suspected fraudulent insurance claims.

The top court noted that fraudulent insurance claims are being filed and allowed, that too, in a fixed pattern, where the same vehicle is shown to be involved in multiple accidents.

A bench of Justices Ahsanuddin Amanullah and Prasanna B Varale, hearing a matter that initially concerned the identity of a vehicle allegedly involved in an accident, said the proceedings had uncovered indications of fraud "of enormous proportion" and expanded their scope to examine fraudulent claims across the country.

"The court deems it appropriate to indicate that it shall be the responsibility of the insurance companies that all claims indicative of fraud are forwarded to the SIT and a pick-and-choose approach is not done. The court will hold the top most management of the concerned insurance companies accountable if it is found that there has been selective forwarding of the cases to the SIT of the concerned state," the bench ordered.

The court said such fraudulent claims not only cause financial stress to insurance companies but can also ultimately result in genuine consumers paying higher premiums.

Directing all states to set up dedicated SITs, the bench ordered that all complaints received from insurance companies concerning suspected fraudulent claims be forwarded to the respective SITs for expeditious investigation.

It also directed the states to provide adequate personnel to the teams and disclose the procedures adopted for investigating such cases.

The bench further directed insurers to take departmental action without delay against their officials where an SIT recommendation or FIR indicates their involvement in facilitating fraudulent claims.

The order also required insurance companies to file affidavits detailing the cases referred to SITs and the in-house action taken against officials suspected of acting against the interests of their companies or facilitating fraud.

The bench noted that Uttar Pradesh had already constituted a special SIT following an earlier Supreme Court order.

The state informed the bench that 2,188 complaints had been received, of which more than 1,029 had been investigated and 231 FIRs registered against 533 accused persons.

The bench also expanded the proceedings by making the Insurance Regulatory and Development Authority of India (IRDAI), the Ministry of Finance, the Ministry of Road Transport and Highways and the General Insurance Council as parties.

The newly added respondents have been directed to file affidavits setting out their present responsibilities, the manner in which they discharge them and suggestions on measures required to tackle the suspected fraudulent-claim problem.

During the hearing, a suggestion was made for developing a common portal containing insurance-claim data that could allow insurers to cross-check whether a vehicle, person or other entity had figured repeatedly in claims.

The court was also told that existing databases such as VAHAN, SARATHI and the Ministry of Road Transport and Highways' E-Detailed Accident Report (EDAR) portal could potentially be integrated to improve verification of accident and vehicle details.

The bench accepted another suggestion that when a motor accident claims tribunal rejects an insurance claim on grounds of fraud or collusion, the insurer should immediately send details to the concerned state SIT and conduct an internal investigation into possible involvement of its own officials.

The bench converted this suggestion into a direction and ordered insurers to disclose the details in their affidavits.

The matter has been listed for further hearing on September 23 when the parties have been directed to be ready with one-page summaries of their affidavits.

Lawyer Jagdish Chandra Solanki also appeared in the case and suggested measures to deal with the situation.