[RahulNagaraj]

Thanks to the Team-BHP fan (he prefers to remain anonymous) who sent this in. Heartfelt gratitude for sharing it with other enthusiasts via this Team-BHP share page!

Hi,

I wish to inform Team-BHP about insurance malpractices that have been seen mostly in mass-market cars (mainly Maruti and Hyundai through their branded/tie-up insurance) in Kerala. Might happen in other places too.

When a customer approaches a dealer workshop for insurance repair work, the following things happen:

1. The dealership makes the owner sign some blank forms (pertaining to insurance formalities).
   
2. The repair invoice is raised in the name of the insurance company and the insurance company pays the claim amount directly to the dealer workshop.
   
3. Insurance policies have a policy excess of Rs 1,000. For Nil Depreciation policies, irrespective of the claim amount, the customer needs to pay only Rs 1000 and a nominal amount for any consumables.

Scam 1 (Without Customer Knowledge)

A customer comes to the dealer workshop for a genuine repair of a dent/ding.

Eg: The actual damage occurred when the owner brushed the right front door of the car against a tight parking space. The owner goes to the workshop. Once the owner leaves the premises, the workshop guys artfully extend the damage to the rear right door and if possible the entire right portion of the car. Since they have the blank forms, they get to fill up the cause of accident column to include the manipulated damage as well.

Scam 2 (Customer induced to make an insurance claim)

The customer comes to a dealer service centre for routine service. Almost all cars will have minor scratches. Workshop Executive convinces the customer that all minor scratches will be removed for a nominal payment. Once the poor gullible customer falls into the trap, the workshop repeats scenario 1. I.e., get a bunch of blank forms signed and makes a few more dents near the scratches without the knowledge of the customer and claims insurance.

Scam 3 (Customer and Dealer Workshop collude)

Eg: The actual damage occurred when the owner brushed the right front door of the car against a tight parking space. The owner goes to the workshop.

Now workshop executive pitches in that once the front door is repainted there will be a paint shade mismatch when compared to the rear door (probably because the car has been exposed to weather elements and the paint shade might have become faded). Also, the workshop executive agrees to take care of any minor scratches in the car without charging any extra amount. Once the customer agrees, the workshop damages the rear right door and if possible the entire right portion of the car. Since they have the blank forms, they fill up the cause of accident column to include the manipulated damage as well.

Now coming to the crux of the issue

All the stakeholders - i.e., the Insurance company as well as the surveyors are aware of this practice. The insurance companies are apprehensive about nixing this practice, as the dealerships are a bulk source of premiums. Antagonising dealerships will result in the Insurance companies losing a bulk amount of premiums. As long as the overall business portfolio is profitable, insurance companies don’t care about these manipulated and fraudulent claims. The independent surveyors are dependent on the insurance company for their income, they too turn into unwilling accomplices. If the dealer insurance portfolio becomes non-profitable, insurance companies cheerfully hike the premiums.

The employees at the dealership have a very low fixed salary. The rest of the salary depends on the revenue generated in the workshop. Once the workshop target is achieved the employees get monetary incentives. Hence they too become enthusiastic participants in this game

Now let’s see how this affects the unwitting customer in the long run (especially the car owners in scenarios 1 and 2)

• Short-Term Impact: All customers have to deal with increased insurance premiums because dealers and some unscrupulous car owners are gaming the system.
  
• Long-term Impact: Any and all repair work records done on a vehicle, especially at OEM dealer workshops are easily available for verification when selling the vehicle. When the customer tries to sell the vehicle, all these repair work history will significantly reduce the resale value.

[Mr.Boss]

These scams are nothing new and exists for ages. Another missing scam is

Veh 1 comes with Part A damage
Veh 2 comes with Part B damage

Claim both Part A & Part B under Veh 1 insurance and charge the Veh 2 owner either a nominal fee or the actual fee.

[vredesbyrd]

Funny because I paid ICICI 32,000-34,000 for my insurance last year (zero dep).
Had my windshield replaced because some beggar threw a stone at it while I was at 100 kph. A crack developed which turned from a chip into a foot long within the next 6 hours.

The windshield cost 8,000.

This year, ICICI is asking 37,000 for renewal.
The workshop doesn't even have a tie up with them.

Or is it one of those "Covid hai, so we'll increase prices and provide delayed/lousy service" type excuse which every company on the planet is using till now?

[rroy92]

Originally Posted by vredesbyrd

Funny because I paid ICICI 32,000-34,000 for my insurance last year (zero dep).
Had my windshield replaced because some beggar threw a stone at it while I was at 100 kph. A crack developed which turned from a chip into a foot long within the next 6 hours.

The windshield cost 8,000.

This year, ICICI is asking 37,000 for renewal.
The workshop doesn't even have a tie up with them.

Or is it one of those "Covid hai, so we'll increase prices and provide delayed/lousy service" type excuse which every company on the planet is using till now?

I would advice you to shop around. Don't just renew the policy. Get quotes from the competition. To name a few, Oriental Insurance, IFFCO Tokio, HDFC Ergo, Tata AIG and more

[Drax559]

All this is great. Now we know about these scams. As Mr.Boss said earlier these things are nothing new and exists for ages. The problem is who's listening. We crib and cry about these things here and in other reviews. Nothing happens. As always Consumer suffers; mentally, physically and emotionally. These dealerships and insurance companies have gotten away with worse things and they will continue to get away. Law is not on our side. Sorry about the rant!

[maheshm619]

I can confirm this from my close circle, as some NEXA workshops in Kerala have helped the customer facelift the car to the latest generation through the insurance route.

[kovilkalai]

As a general principle, insurance products work well in markets where the justice system is a well-oiled machine. Any kind of insurance throws up opportunities for moral hazards and fraud. There are criminal liabilities, but as with anything else in India, civil penalties are limited - anyone who has gone to consumer court for service deficiency would have seen the levels of punitive damages.

Further, the IRDA regulates insurance companies, but not car dealers or for that matter hospitals. Other than the criminal laws on the books, there is no regulation or oversight on these entities.

For the insurance business to grow and morph into a well-oiled machine, this situation will have to change. For that, our government needs to write new laws. They need to streamline judicial processes. Punitive damages need to go up. Why? Because for every case of fraud that is caught, there are probably a hundred that aren't caught. If you give someone a choice of staying in jail for 3 years and pocketing ill-gotten gains in crores or returning all the ill-gotten money, they may very well choose the former.

[udzgodfather]

Over the period of time insurance has become the tool of the one in power to get things done without much fuss, be it Automobile Insurance or any other insurance, I remember one of my colleague was charged 1.75L or something for body test and checkups. Insurance abuse is the norm of the time if you pull the right strings.

[Voodooblaster]

Originally Posted by Mr.Boss

These scams are nothing new and exists for ages.

Very true

See this post by a Bhpian (and an insurance industry insider) in TBhp (Indian car owners damage their cars for bogus insurance claims) (link) which highlights same issue

Another insurance fraud thread in TBhp (Fake car accident victims and Insurance scammers)(link)

Insurance industry should have a centralised database with a unique ID (PAN/AADHAR) and have something similar to CREDIT SCORE and blacklist customers who are fraudulent

At the very least these shady characters should be made to pay higher premium

[SnS_12]

The motor Insurance scam is minuscule compared to the mediclaim Insurance scam in our country but the modus operandi is similar once the Insured arrives at the hospital/car dealer first thing they will ask if you have insurance and the moment you say yes that is when their cash register starts rolling.

In both cases if you have cashless facility at this places then you could be financially more secure as you will know upfront what amount you will have to bear from your own pocket. But when it comes to mediclaim cover one still has to be vigilant as Insurance companies these days have a lot os restrictions on payouts on room charges, treatment costs etc. So, don’t be fooled by the hospital to take a certain category of room or treatment that is not required just because you feel the Insurance company will foot the bill.

Our health care insurance costs are no where near what you have to pay in developed countries but it will reach there eventually. Its a norm to have a 3-5 lac mediclaim cover provided by the company you work at where if its an MNC they will pay for it or in smaller companies they will deduct it from your salary but overall its cheaper and wider in cover then one would get if he/she buys it on their own as its a group benefit. But all these policies run on a 100% + loss ratio year on year and this can’t go on forever even if a insurance company wants the other group business and is considering to absorb this loss to make money on the policies.

Motor Insurance on the other hand still contributes to over 30% of India’s insurance portfolio and you many players in the market but its still seeing a steady increase in premium too especially the compulsory third party cover.

[Sandy Damodaran]

While I do agree with everything in the post, the insurance cost has mainly gone up due to Third party premium mandated by govt shooting up and tax increase.

Pre GST the tax was 12% post GST there's an increase of 50% .
Increase in liability only component has increased by over 60% for mid category vehicles.

Don't think the premium has increased due to this practice as this has been the case since a very less long time

[shridhan]

2 scenarios that must be explained.
1. When insurance company pays 100% of cost.
2. When there is significant depreciation, say 50%.

Things will differ according to this. If you are getting only 50% of cost by insurance, you tend to avoid unnecessary repair. You will discuss with workshop on how to get it done cheaply.

In other case, owner will insist on workshop on getting everything repaired and using original parts.

[invidious]

I've only once claimed insurance and that was because of damage done by Cyclone Takutae - uploaded pics and claim was approved by Digit - I had to shell out some money but overall work was done by authorized workshop in cashless manner.

However, once I outside my office at my parking spot one guy was repeatedly hitting his own car against the pillar (front right side) with a claim inspector standing next to him - apparently to claim more damage. I just asked him to remove the car from my spot and do this somewhere else.

[Stribog]

Why would anyone claim insurance for scratches and dings to even begin with? Assuming a new car even in the 10l category the NCB loss would outweigh the costs of the repair.

[chinkara]

Originally Posted by Stribog

Why would anyone claim insurance for scratches and dings to even begin with? Assuming a new car even in the 10l category the NCB loss would outweigh the costs of the repair.

If a claim has happened, might as well do a "paisa wasool".