10th Global Conference of Actuaries
Lemons Problem and Health Insurance Fraud
Role info asymmetry in inducing medical insurance fraud. By simply T T Rama Krishna Rao
Samuel B Sekar
In insurance contracts erroneous or fake information results in distortion of truth. Imperfect information on the other hand results in adverse selection (lemons) and moral risk. Imperfect data when performed intentionally, with unwarranted profit in mind, wherever one of the functions will be a sufferer to the cheating of the other, is a fraud. Insurance business can be not resistant to frauds though the " Principle the most Good FaithвЂќ is one of the support beams, which assures the success of insurance operations. When this rule is breached, it interferes with an insurer's capability in meeting it is social and business obligations. This is what happens, when both the person buying an insurance plan or the one who supplies insurance commits fraud, by giving or withholding information which usually misleads the choice making process. The knowledge imbalance is called lemons problem, a form of " Asymmetry of informationвЂќ. This kind of paper targets health insurance scams resulting from asymmetry of information вЂ“ the lemons problem. Crucial terms
Health Insurance Fraud, Uneven Information, Theory of Utmost Uberrima fides, Representations, Warranties, Concealments, Mistakes, Non-disclosure, Require Side Frauds, Existing Data, Non-Existing Info, Adverse Variety, Moral Threat, Lemons Issue, Principal-Agent Issue.
A person asked God, " What amazed you most about human beings? вЂќ Our god answered, " They shed their well being to make funds and then funds to restore their health. вЂќ Although life is less short lived today than it was a couple of decades back and with life covers and lifestyle expectancies throughout the world increasing, the future of the triumvirate of wellness, health care and health care costs continues to be a location of concern pertaining to Governments around the globe. The position of medical insurance is extremely important in obtaining " Overall health for allвЂќ. Indian health and fitness market is said to be worth Rs. 3500 crore, and is developing at a CAGR of 40%. you The growth is definitely attributed to the change in the mindset which has come in our attitude toward health. The adage, Health is wealth, was before thought to be to get the elderly and well-settled sections of society but today it seems to influence the remaining sections of human population. For instance, Jagdeep Kapoor, CMD of Samsika, says, " People in developed market segments realise they will enjoy materials goods only when they live long and well. In the matter of our region, the lack of sensitivity to overall health was not mainly because we were sidetracked by amusement, but mainly because we were distracted by necessities. But the two markets are aware of the importance. вЂќ The increasing recognition among citizens about the value of keeping good health as also the Government's stand in raising the health requirements of their citizens generally has altered the health proper care market in a lucrative one out of India. According to Article 47 from the Directive Rules of Indian Constitution, " the 1
Technopak Report, The Treatment Touch, Brand Equity, The economic times, 10th August 2007.
10th Global Conference of Actuaries
work of the condition is to raise the level of diet, the standard of living and also to improve public well-being, вЂќ of its citizens.
Despite the limited spread of health insurance in the area, the claims ratio of Mediclaim plans rose coming from 94 percent in the year 2002 to a whopping 140 percent in 2005. This sharp increase in claims within a short span of two years was obviously a shock for the overseers of health insurance program вЂ“ the Insurance Regulatory and Development Specialist of India (IRDA). This kind of phenomenon provoked the IRDA to review the existing healthcare procedures which were not merely matching the current needs from the people, yet also offered room pertaining to unwarranted gain to a few categories of notorious clients who were proficient...