Monday, February 4, 2013

Fraud in every ICICI Lombard’s insurance schemes, says the former national fraud control manager

"Over a period of time IRDA has become stooge of insurance companies and not discharging its responsibilities in the interest of the nation and policy holders"

"Yes, I have informed her(Chanda Kochhar the Managing Director (MD) of ICICI Bank ). She is also involved as she chose to keep quiet on the whole matter. She through her team, appointed to look into the matter, asked me to keep quiet."


Gangadhar S Patil/Sandeep Pai

Mumbai: In an interview with DNA, Deepak S, former national fraud control manager with ICICI bank talks about how misappropriation of funds by ICICI and cover-ups. During his tenure of nearly 5 years with fraud control unit, he had reported involvement of more than 500 ICICI Lombard (a subsidiary of ICICI Bank) employees/channel partners in different frauds.

Even as his company introduced whistle-blower policy back in 2007 intending to protect its employees from any kind of harassment and encourage them to inform the company about frauds, nothing much seems to have changed. He says that the whistle blower policy is selectively applied for junior level employees only and senior and top management is provided immunity for frauds committed by them.

Deepak who was earlier heading fraud control unit as National Manager - Fraud Control Unit since its inception has now been transferred to Human Resource department no or little work, which he says is retaliation by his company for being upright in highlighting frauds by the management.

Interview: Ten questions for Deepak Srivastava, former national fraud control manager with ICICI Lombard.

When was the first time that you detected anomalies in the implementation of government funded insurance schemes by ICICI?

DS: The first fraud came to my knowledge was in 2004 - 05 in Uttar Pradesh. The name of the policy was Panjikrit Kisan Bima Yojana in which the company deliberately withheld genuine claims of farmers for no faults of their and in some cases the claims were rejected on flimsy grounds. I was in Lucknow handling some portion of this policy and I was told by my senior management to ensure that not more than 1100 - 1200 cases are settled as against approx. 5000 reported cases. Settling more cases would have made policy loss making to the bank.

How many cases of irregularities, committed by ICICI Lombard employees, have you reported?

DS: Can't put a number but my unit handled more than 2000 employee/channel related frauds in last 5 years. Also, not all cases are reported to Fraud Control Unit, many cases are reported to the Insurance regulatory and development authority (IRDA), the Govt., the senior management, compliance officer, ICICI bank and others.

Has your company taken any action on your investigation reports? If yes in how many cases and if not, what are the reasons?
No action was taken by ICICI when the perpetrators were directors and senior management employees. I was told that things were done in the interest of the company. On one occasion I was told that fraudulent enrolment is done to increase the premium income and to offset losses.

Also, I was asked to dilute the findings in internal report as true findings may be detrimental to the company and its officials in the event of scrutiny by law enforcement agencies.

Left with no option I escalated the matter to chairman of ICICI Lombard and MD and CEO of ICICI bank Chanda Kochar on 12th March 2011 in response to which I got a call from Sanjay Choughale - head - Internal Audit, ICICI bank who promised to form a team to look into the matter and promised independent probe.

I contacted bank after nine months in December'11 to know the status of the case to which I was told that they cannot share the findings and I was asked to forget about it.

Has anyone from top management is ever been removed for their involvement in any insurance fraud?

No, not to my knowledge, though top management is directly involved along with the auditors, ICICI bank, fairfax, Canada and others. It is not only the story on one insurance scheme, the fraud runs across many.

Is government aware of such frauds in ICICI Lombard? Have you ever reported such cases to government? What happened to those reports?
IRDA - The insurance regulator keep getting complaints as per my unofficial knowledge but they have collude with my company. It was quiet evident in the manner they handled Panjikrit Kisan Bima Yojana and Shetkari Apghati Bima Yojana complaints by siding with the management against the interest of policy holders.

The Maharashtra government even filed a case before national consumer forum against ICICI Lombard for denying genuine claims. I risked my career and my life and informed CBI several times and gave all the proofs but got no response from them.

I have referred a few matter to CBI and sent several reminders later on. I did it when I found that attempts were being made by ICICI bank and ICICI Lombard to scuttle the issue. Have also recently written to PM and marked cc to Anand Sharma, Montek Singh Ahluwalia, Veerappa Moily, Salman Khursheed, RBI governor and many other important officials and I am yet to hear from them.

Please explain in detail the different type of frauds committed by ICICI Lombard?

Denial of genuine claims - in policies like Panjikrit Kisan Bima Yojan in UP and Shetkari Apghati Bima Yojana of Maharashtra the company wilfully rejected claims for the losses exceeded the premium. As per the basic insurance principle you cannot reject genuine claims. There were unconfirmed reports which suggested that company first settles all the claims genuine or fake so as to show performance to the govt. Subsequently, the company would start rejecting even the genuine claims if the losses exceeded premium. It happened in Assam in RGSSBY and Weavers policy in the year 2008-2009.

Fake enrolment - Making use of the weak government machinery fake enrolment of ineligible and non-existing people is done and a huge sum of premium is collected from the govt.

Furnishing incorrect numbers and information to Govt. – Incorrect enrolment numbers are submitted to the government. During my investigation, I found out that numbers were always fudged to suit the policy terms and conditions. In one of the cases, when my bank came to know about fraud by its senior management submitted misleading letter to ministry of textiles and ministry of agriculture, Govt. of Rajasthan. It only shows that such thing is quiet rampant and company has no regard for the law of the land.

Non distribution of health cards - I found that in few cases in states like UP and Tripura the health cards pertaining to RGSSBY and Health Insurance Scheme (weavers policy) were deliberately not distributed by the company. In case of Rajasthan under RGSSBY the company's management decided to destroy the cards.

Can you explain how the company benefits from these frauds? If suppose a fraud is committed, so does the entire money swindled goes to the company’s coffer as profit or the officers involved?
DS: Obviously, such ill-gotten money enhances the top line and bottom line of company. Management does not get direct benefit but it enhances their performance on which depends their bonus, salary increment, continuity in the company and value of the stock.

Have these frauds been brought to the notice of Chanda Kochhar the Managing Director (MD) of ICICI Bank? What is her stand on this?
DS: Yes, I have informed her. She is also involved as she chose to keep quiet on the whole matter. She through her team, appointed to look into the matter, asked me to keep quiet.

Does IRDA play a competent role in detecting these frauds and punishing the culprit? If No, then what is the reason?

No. Over a period of time IRDA has become stooge of insurance companies and not discharging its responsibilities in the interest of the nation and policy holders. Their officials are hands in glove with my company.

Did your company protect you as per the whistle blower policy of the company?

DS: I was assured by ICICI Bank that my rights will be protected and that there will not be any impact on my promotion and appraisal. However, bank backtracked and asked me to forget the issue. I was threatened with dire consequences. They asked me resign else they will transfer me forcibly. And indeed in the month of Feb'12 they transferred me to HR with no or little work.

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