3rd party motor insurance fraud under scanner as insurers face rising claim payouts

General insurers are stepping up efforts to detect and crack down on fraudulent motor third-party insurance claims as the segment faces rising losses from higher compensation awards and a growing number of uninsured vehicles.The move comes amid concerns over claims involving fake accidents, forged documents and fabricated injuries. A recent order by the Madras High Court has also given insurers a fresh push to seek stronger action against those involved in such fraud.Go Digit General Insurance secured a July 29 order from the Madras High Court for the appointment of district-level special investigation teams across Tamil Nadu to probe suspected fraudulent insurance claims, reported The Times of India (TOI). The court has directed authorities to investigate claims involving fake accidents, misrepresentation, forged insurance policies, fabricated injuries and false medical reports and bills. Police have also been asked to collect relevant evidence, including call detail records, during investigations. The court further directed that criminal proceedings be initiated against those found responsible. Departmental action has also been ordered against officials found to have facilitated fraudulent claims or failed to prevent them.MOTOR THIRD-PARTY FRAUD BECOMES AN INDUSTRY CONCERNThe issue is gaining attention across the insurance industry as motor third-party insurance already faces pressure from rising claims costs. Krishnamoorthy Rao, MD and CEO of Generali Central Insurance, told TOI that motor third-party fraud could become an industry-wide issue as insurers deal with higher compensation awards and an increase in uninsured vehicles.One concern flagged by Rao is the alleged conversion of non-road traffic accident claims into motor accident claims.This can increase the number of claims being brought under motor third-party insurance and, in turn, add to insurers' liabilities.HIGHER COURT AWARDS ADD TO THE PRESSUREFraud is not the only factor pushing up costs for motor insurers.Insurers are also increasing provisions following a recent Supreme Court judgement that introduced compensation under a separate head for loss of domestic care.The compensation under this head is based on a monthly income of Rs 30,000, with periodic revisions for inflation and socio-economic changes, according to the report.Earlier, compensation for this aspect was linked to a multiple of the victim's income.For insurers, this means that genuine claims can also result in higher payouts, even as fraudulent claims add another layer of pressure.The latest action in Tamil Nadu therefore signals a more aggressive approach towards motor third-party fraud, with insurers looking beyond internal claim checks and seeking police investigations and criminal action where fraudulent activity is suspected.- EndsPublished On: Aug 11, 2026 11:24 IST