INSURANCE
IRDAI issues new guidelines to address, manage risks emanating from fraud
Oct-28-2024

The Insurance Regulatory and Development Authority of India (IRDAI) has issued new guidelines to provide regulatory framework on measures to be taken by Insurers and Distribution Channels to address and manage risks emanating from fraud. These Guidelines may be called the Insurance Regulatory and Development Authority of India (Insurance Fraud Monitoring Framework) Guidelines, 2024. These guidelines shall be applicable to all insurers and distribution channels unless otherwise specified. 

The objective of new guidelines to establish a comprehensive framework to identify, assess, and mitigate fraud risks effectively across the insurance industry. This includes setting clear standards for fraud detection and prevention, ensuring robust internal controls, and promoting transparency in reporting and investigations. The guidelines aim to enhance the sector’s resilience against fraud, foster a culture of integrity, protect policyholders' interests, safeguard financial stability and maintain public trust.

Insurer shall put in place a Board approved Anti-Fraud Policy which shall include the procedures, processes and safeguards to be built in by the Insurer to deter, prevent, detect, monitor, investigate, and report fraud. Every insurer shall establish a Fraud Monitoring Committee (FMC) to oversee fraud deterrence, prevention, detection, monitoring, investigation, and reporting activities. Every insurer shall establish an independent Fraud Monitoring Unit (FMU), separate from internal audit, which will support FMC in discharging its functions and shall be responsible for implementing measures for fraud deterrence, prevention, detection, monitoring, investigation, and reporting. Insurers shall put in place appropriate measures to identify and assess fraud risks.

In order to ensure the fraud risks identified as part of the Annual Comprehensive Risk Assessment are mitigated, Insurers shall have in place appropriate measures to deter, prevent, monitor, investigate, and report fraud with respect to Internal Fraud, Distribution Channel Fraud, Policyholders or Claims Fraud and External Fraud. Every insurer shall establish and maintain an ‘Incident Database’ of relevant parties who have been convicted of fraud or have attempted to defraud the insurer or policyholder.

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