Reimagining risk in General Insurance : Vehicle and Hospital Due Diligence 2.0

The Indian insurance ecosystem is at an important inflection point. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 has opened up the industry to more players, with a clear objective of enabling Insurance for All by 2047. However, one of the biggest roadblocks remains trust.

For a long time, insurance has operated as a trust-deficit industry, and this gap exists on both sides. Insurers struggle with fake and fraudulent claims, which leads to tighter controls. Customers, on the other hand, face issues such as partial payouts, long claim settlement timelines, and uncertainty.

As a response, traditionally, insurers have viewed this as a trade-off: tighten checks and risk losing customers, or keep onboarding smooth and absorb higher fraud risk. In reality, it does not have to be either. With smarter approaches to underwriting and claims checks, insurers can maintain speed while reducing fraud. This is not about replacing existing checks, but about strengthening them with newer signals that are better suited to modern fraud patterns. The key question then becomes how to do this effectively.

Why Traditional Risk Checks Are No Longer Enough

The motor insurance industry is driven by high sales growth pressures and intense competition with respect to pricing. It also struggles with high loss ratios due to fraudulent claims. Basic vehicle RC checks along with claims history alone at the time of underwriting do not indicate whether fraud is likely. Insurers need to look beyond these basic signals. The more effective approach is to build a more comprehensive risk profile of the insured vehicle.

Fraud in this segment often follows a pattern, individuals with a history of frequent accidents move from one insurer to another to cash in on claims and vehicles with past legal history have higher propensity to be involved in high value claims. The best way to solve this is reviewing a vehicle’s adverse history through e-FIRs and court records along with ownership transfers and e-challans as early warning signals at the time of underwriting rather than claims, when it's too late. During our work with one of the country’s largest motor insurers, we flagged adverse legal history in nearly 5% of privately owned vehicles and close to 10% of commercial vehicles. While adding checks at the underwriting stage may feel overwhelming in a segment like motor insurance driven by straight-through processing and high sales volumes, many insurers are now applying instant risk checks before insuring vehicles, especially second hand ones where claims ratios are much higher.

Health insurance is an even more complex ecosystem. One of the major leakages today comes from claims raised via non-network hospitals. Common patterns include hospitals that do not exist, or claims for treatments that the hospital is not equipped to provide. A week-long cardiology treatment bill from a day clinic is a typical red flag. A fraud team can investigate such cases individually, but when this happens at scale, across tons of claims, some fraud inevitably slips through and more importantly honest policyholders have to wait longer for settlements and go through a bad experience.

While investigation is one way to stop fraudulent claims, a more effective approach is stronger validation upfront. Hospital certifications can be used to verify treatment capability. Criminal records of the hospital entity, as well as its owners and promoters, can help identify past suspicious activity. Financial data also adds context. For instance, if a hospital with ₹25 lakh in annual revenue submits five claims worth ₹20 lakh, that discrepancy is meaningful. While working with one of the largest health insurers, we flagged about 8% of the non-network hospitals indicating various risk signals.

From reactive to proactive : A fundamental mindset shift

Shifting focus upstream from claims assessment to risk assessment during onboarding requires a mindset shift and a change in the operating model. This can only come with technology solving some of the problems at scale, that too effectively. For example, motor insurers working with us generate vehicle due diligence reports in seconds, going beyond basic Parivahan checks. Similarly for health insurance, we are working with leading health insurers to identify high risk non-network hospitals at the time of empanelling or rather the time from which first claim comes.

As we move forward, insurers need to adapt to the idea that smart underwriting doesn’t mean adding friction everywhere. It’s about applying the right signals at the right points in the insurance lifecycle, ensuring that only genuine policyholders enter the system. The result is fewer fraudulent claims and a healthier loss ratio, without compromising on speed or scale.

About IDfy

IDfy is Asiaʼs leading TrustStack, trusted by the best, with global expertise and enterprise-grade tech. We're solving for real time risk monitoring and intelligent fraud detection through scalable tech solutions while ensuring seamless onboarding experience.

Author: Sidhant Malhotra, Client Partner, Head of Insurance Propositions, IDfy.

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of IIA and IIA does not assume any responsibility or liability for the same.