Government paid private insurer crores in premium for ghost beneficiaries

The
discovery
of major irregularities in the delivery of
Centrally sponsored insurance and
health schemes for farmers and artisans
by ICICI Lombard GIC Ltd. suggests poor
supervision of key welfare programmes
intended for the rural poor is leading to
the 'direct cash transfer' of money from
the exchequer to private insurance
companies.
Departmental inquiries have established
that ICICI Lombard — India's largest
private sector insurance company —
floated ghost beneficiaries under various
welfare schemes of the Textiles Ministry,
the Rashtriya Swasthya Bima Yojana
(RSBY) and the Weather Based Crop
Insurance Scheme (WBCIS) of the
Agriculture Ministry. The losses, though
not yet fully computed, are believed to
run into crores of rupees.
The Textiles Ministry has already
directed ICICI Lombard to settle claims
and return the premiums that had been
paid by the government for a large
number of bogus beneficiaries.
ICICI Lombard was awarded a contract
to implement various government
schemes, including the Rajiv Gandhi
Shilpi Swasthya Bima Yojana (RGSSBY),
the Comprehensive Health Insurance
Scheme (HIS), the RSBY and the WBCIS,
following a competitive bidding process.
Under these schemes, 75-90 per cent of
the premium is paid by the Central
government, and the balance by the
beneficiaries; in some cases, the
beneficiary share is paid by the State
governments. Eligible individuals are
identified by ICICI Lombard and are
certified by the government. As per
policy guidelines, the implementing
agency, ICICI Lombard in this case, was
given a target of enrolling a minimum
number of people within a year. It
becomes important for the agency to
achieve the target to make it eligible and
competitive for next year's bidding
process.
However, in January 2011 a company
whistleblower informed ICICI Lombard
senior management and ICICI bank
authorities that since the process of
identifying eligible beneficiaries was
time consuming, there was considerable
pressure on the ground to enrol
beneficiaries quickly. He claimed that
when the insurance giant failed to meet
the targets, it opted to create ineligible
beneficiaries and claim premium from
the government.
In submissions made subsequently to
various government agencies, including
the CBI, the whistleblower said premium
collected against bogus/ineligible
enrolment benefited the company
directly at the expense of the exchequer
since there was no need to pay the
claims of beneficiaries who didn't exist.
"The company has misrepresented facts
to the government concerning these
poorer sections of society for years," he
told The Hindu, requesting that he not
be identified for legal reasons.
"As far as the WBCIS is concerned, ICICI
Lombard never informed the
government of the bogus enrolment. The
company gave misleading letters, never
accepted bogus enrolment and never
took action against the erring agents,"
the whistleblower alleged.
Internal company communications and
documents accessed by The Hindu reveal
that in 2011 a complaint was received by
both ICICI Lombard and ICICI bank
alleging enrolment of ineligible
beneficiaries under the RGSSBY in
Rajasthan in the fourth year (2009-10),
and the subsequent denial of claims by
ICICI Lombard. Further, that data was
tweaked and fudged in the Management
Information System (MIS) of enrolment
provided to the Textiles Ministry in
order to meet the terms of the MoU with
the Ministry. Fake utilisation certificates
were issued in order to claim premium
payments from the government. The
complainant further alleges that the
Executive Director and senior
management of ICICI Lombard issued
and implemented instructions to recall
and destroy the cards issued to ineligible
beneficiaries so as to avoid any liability
under the policy. The Hindu has access
to the correspondence of July 28, 2010,
which refers to the decision to destroy
the cards.
Finally, when the Textiles Ministry
uncovered the list of ghost beneficiaries,
it ordered recovery of premium against
11,000 ineligible 'fraud beneficiaries,'
along with 10 per cent penal interest.
However, it stopped short of blacklisting
ICICI Lombard for five years as per the
terms of the MoU.
The WBCIS is funded by the Central and
State governments. An internal inquiry
by ICICI Lombard revealed that in
Sriganganagar district (Rajasthan), out of
3,158 beneficiaries enrolled, 2,093 did
not exist on the addresses given and thus
were ineligible for claims.
Under the scheme, beneficiaries
automatically become eligible for claim
amounts if there is any unforeseen
natural act or abnormality in climate
(drought, abnormal rainfall or
temperature) as this will have affected
farm output. Information about changes
in climate is provided regularly by the
local weather monitoring body to the
government, which then writes to the
insurance agency directing it to settle all
claims if there is any abnormality
observed. But despite enrolling 3,158
beneficiaries, ICICI Lombard did not
settle any claims until the State
government directed it to do so.
Senior ICICI Lombard officials
confirmed to The Hindu that the CBI had
begun an initial probe and that the
company was cooperating with the
agency.
"Immediately after the investigation, the
company informed the government
about the above mentioned
discrepancies. Following this, the
government called for a review among
all stakeholders, including the company.
After due consideration in the meeting,
the government advised the company to
settle all such claims of Sriganganagar
and publish the same in a local
newspaper," stated an ICICI Lombard
response to a query from The Hindu.
According to the whistleblower,
however, instead of informing the State
government of the bogus beneficiaries,
the company chose to settle the bogus
claims amounting to Rs. 13 crore as the
company did not want to be
investigated. The total premium paid to
ICICI Lombard during rabi and kharif
2009-10 was nearly Rs. 85 crore. The CBI
has launched a preliminary probe into
the alleged malpractices by ICICI
Lombard under these schemes but is yet
to file a formal complaint.
As the farmer's personal accident policy
of the Maharashtra and Uttar Pradesh
governments became a loss-making
proposition, the management of ICICI
Lombard decided to reject genuine
claims on flimsy grounds like delay in
intimation by claimants. It was only
after the intervention of courts that it
settled a few more cases under the
policy. However, till date a large
number of genuine claims remain
unpaid.
The Maharashtra government filed a
case against ICICI Lombard in the
national consumer forum (OP/27/2008)
for Rs. 22 crore, and the forum ordered
settlement of over 800 claims (worth
Rs.8 crore); but the company is yet to
fully comply with the order. The
Maharashtra government informed the
insurance regulator, IRDA, of this but no
action has been taken. "In UP, for the
farmers policy (2004-05), the genuine
claims of over Rs. 25 crore were
repudiated. In fact, only 16 per cent
claims in Maharashtra and 32 per cent
claims in UP were settled before the
interventions of the courts," the
whistleblower said.
ICICI Lombard strenuously denies the
allegations pertaining to irregularities
with respect to the RGSSBY and the
WBCIS and other polices. According to a
spokesperson, while settling the claims
for Sriganganagar in Rajasthan, the
company observed abnormal claim
patterns and therefore initiated an
investigation on its own. The
investigation revealed deficiency of
documents and a few other anomalies
with some beneficiaries. ICICI Lombard
says it received complaints that khadi
workers may not be eligible for this
scheme and so it has sought the
government's advice on the eligibility
issue. It denies there were any financial
irregularities in the administration of
the scheme.