Insp of sop for detection of fraud

1
Role of Internal Operating
Procedure in
Preventing Frauds

Role of Internal Operating
Procedure in
Preventing Frauds
Presented by
R. Ravindra Kumar
Regional Manager
LIC OF INDIA
GANDHINAGAR INSPECTION CENTRE
10/24/2020 rravindrakumar@gmail.com 2

Internal Inspection
• careful examination or scrutiny.
• "on closer inspection it looked like a fossil“
An inspection is, most generally, an organized
examination or formal evaluation exercise. In
engineering activities inspection involves the
measurements, tests, and gauges applied to certain
characteristics in regard to an object or activity.
Act of examining something, often closely.. Organization
that checks that certain laws or rules are obeyed..
Inspection synonyms: examination, scrutiny.

Standard Operating Procedure
• Written procedure prescribed for repetitive use as a
practice, in accordance with agreed upon specifications
aimed at obtaining a desired outcome.
• The purpose of a SOP is to provide detailed instructions
on how to carry out a task so that any team member can
carry out the task correctly every time. The purpose or
objective of a SOP should restate and expand a well-
written title. A well-written SOP will facilitate training and
Quality in Servicing.
• In LIC we have SOP in form of Service Manuals for ALL
DEPARTMENTS

Standard Operating Procedure
• All these Manuals are procedure specific to our operation that
describes the activities necessary to complete tasks in
accordance with industry regulations, provincial laws or even
just your own standards for running our Life Insurance
Business. Any document that is a “how to” falls into the
category of procedures.
• A Manuals of SOP, is a document that provides step-by-step
instructions on how to perform a particular Business activity,
such as Servicing or Record keeping for Servicing or
Marketing. Although most SOPs are presented as text
documents. In LIC we Call them Service Manuals. Manuals
Can also contain images or videos to help clarify their
instructions in Current Scenario.

Servicing Manuals (SOP)
• Step By Step
• Standard operating procedures take a process and
break it down step by step. This may include
anything from how to thoroughly From Registration
of Proposal to the sequence SB/MATURITY/ DEATH
CLAIMS and Accounts as per Accounting
standards.
• In Writing
• Many businesses write down policies and standard
operating procedures. If the work requires many
steps, SOPs will take up more space in the manual
than policies and procedures. In practice, many
policies are merely passed down orally or posted on
the wall.

Difference Between Policies &
Procedures Vs. SOPs
• Businesses normally set rules on how the
the work gets done, and will use standard
operating procedures, called SOPs, as well
as a set of policies and procedures to
accomplish work predictably and efficiently.
There are difference between the two.
Policies and procedures give an overview of
a company’s activities. Operating strictly “by
the book” means adhering to (SOP) Manual
procedures.
•10/24/2020 rravindrakumar@gmail.com 7

Benefits of S O P
• Standard SOPs look more toward standardized ways
to get work done, while policies and procedures
allow more room for a worker to improvise. Because
of this, policies and procedures create more
likelihood of a standardized product or service,
but SOPs insure that a product or service comes out
the same way every time.
• Policies and procedures generally come from upper
management. A Department or Manager oversees
and enforces most standard operating procedures.

Benefits of S O P
• Policies and procedures describe the generalized
view of a job without getting into the major specifics,
and often remain the same within a department or
across the company as a whole. These often govern
who does what on the job. Standard operating
procedures get down to specifics of how a task is to
be accomplished. SOPs work to fulfill policy and
procedures. In general, policies and procedures
come first while standard operating procedures are
drawn up after a company determines its policies
and procedures.

Role of Inspection in
Preventing Frauds
• Provide opinion about the adequacy of systems &
procedures to curb a potential fraud.
• Include areas susceptible to frauds in the
questionnaire.
• Provide necessary support in causing investigation.
• The minutes of monthly meetings conducted by
various Fraud Monitoring Committees shall be
examined during the course of Audit, Inspection &
QMA. Appropriate debits shall be given by
Audit/Inspection if the minutes are not maintained
properly.
• Audit / Inspection departments may make Exception
Reporting to Audit Committee, if required.

• Points of concern for Sales department-
==================
• ✓Irregular MAB Review✓Casual approach in collecting
manual requirements of Advances disbursed
• ✓Incompete Agency application form and other official
process
• ✓Irregularities observed in Muster and Leave of DO
• ✓Hypothecation under fully repaid loan cases are not
cancelled in due course
• ✓Festival Advance is being granted without verification of
(12) lives with 6 lakhs SA
• ✓Old O/s OTRT not cleared after taking approval of
ZO✓RCA and CCA review not being done properly
• ✓Review of Advances in accordance with club membership
not done.
• ✓In some cases Gratuity to Agents found pending✓CLIA
renewal not being done in time

POTENTIAL AREAS OF FRAUD
SALES
• To check SOP@100% followed as issued by C.O.
• DVM@100% check at every department
• Sales-Stipend Review check,MBG
• All vehicle Advances
• Check, All ERC of DO’s Credit of Allotments of
Agents cases
• No Coordinations between building painting and wall
painting.....(advertising plan)
• Development officer's "Helpers" working in BO
having essay excess of records.....some time

Underwriting & Reinsurance
• Non-disclosure of material facts at the time of proposal
• Fake medical examination and Special medical
examination
• Forging of special reports by TPA for completion of new
business
• Delayed/no cheques dishonor action of proposal deposit
• Proposals completed in contravention of the higher office
decision
• Proposals completed without underwriting by Competent
Authority
• Non-disclosure of correct age

Underwriting & Reinsurance contd.
• Forged/fake financial documents, Age proofs, identity
proofs etc.
• Conversion of Single into Regular premium mode etc.
• Non Compliance to KYC/AML
• Misuse of outstanding proposal deposits
• Delayed or no Reconciliation of proposal deposit schedule
• Insurance on the lives if non-existent parties
• Insurance to uninsurable lives
• Third party adjustment of BOC
• Lack of control over policies returned undelivered with
remark ”No such person”
• Refund of proposal deposits to incorrect payee

POTENTIAL AREA OF FRAUD
NB Department-
• ✓Consent for charging extra not being obtained
• ✓Necessary clauses not stamped/affixed on Bond
• ✓Female cases-AnnexureI,MHR missing
• ✓Time lag in dispatch of Poicies
• ✓Pending cases of NEFT validation,balance BOC
Refund
• ✓Recheck of measurement not done as per guidelines
• ✓Reinsurance cases found pending
• ✓Refer to DO Register and TPA register not updated
• ✓TPA charges not being recovered in CD
/Postponed/Declined/Cooling off cases

NB
• Cooling off cases
• NB-Underwriting,Adjustment of proposal deposit for
one proponent to others including lump sum
deposits ,Colling of cases check@100% etc...
• Checking of NEFT Mandate at that time of
registration or rectify at that time of payment
• NB Third party Adjustment must be check. etc...

CAUTION TO OFFICER
FOR PROCEDURAL LAPSE
Due to Negligence

Points of concern in Os Department
====================
• ✓Muster marking and Leave processing irregular
• ✓AMC Register not updated with Name of vendor,Period of
Contract,Mode of servicing etc.
• ✓Proportionate recovery of Income Tax every month not done
• ✓Fire extinguisher maintenance Training not taken care of
• ✓Ambience and record keeping sometimes not up to the mark
• ✓No adherence of COVID-19 protocol in many places
• ✓Proper record keeping of Inward-Out ward-Courier-Speed
post missing

• Tax matters check@100% with circular,if reported
leakages
• Statutory payments obligation to Law of Land
• Check,Like Minimum Wages Act,RTI,ESI Act etc...
• Courier services.... without approval
• Store code must be checking in DO OS
• Non Operative QCC Committee

Points of concern in
Salary Saving Scheme Departments:
• Serious procedural lapse is observed in daily functioning
of department and record keeping at Branch Level. We
have also observed that department is being neglected
and run with casual Approach ignoring laid down Manual
Procedure Special .Report Issued DO to pay fruitful and
Intensive QMA Visit for improvement of working of
Branches.
• Adjustment errors in the branches are very high. No
significant efforts were made by branch to reduce number
of adjustment errors.
•

Points of concern in
Salary Saving Scheme Department:
• Annual premium position letters and Bonus
Intimation letters Not sent to policy holders during
IIP
• Gap Intimation letters not issued to policy holders
during IIP
• SSS collection outstanding for more than one
month. Adjustment of SSS collection towards
premium and deposits were NOT done within 5 days
• SSS errors broadly check and all SSS Gap to be
reconciled with adjustment especially check of
unclaimed accounts

Salary Saving Scheme Department
• Adjustment of SSS Collection (check
adjustment done as per invoice received
from)
• SSS errors broadly check and all SSS
Gap to be reconciled with adjustment
especially check of unclaimed accounts
• DVM@100%

Point to Be Noted
• First insurance at advance age
>35...w/o define income....and
nomination in favour of cl 2 Brother,
Sister or Stranger.....May be suspicious
moral hazard....
• Over writing/ whitener in special
reports......
• Hand written.....Death certificate......
• Revival after 5 year......death claim with
in Three years....10/24/2020
rravindrakumar@gmail.com
23

Be Careful
• Revival after 5 year......death claim with
in Three years....
• CSBO Accounts…….
• Pakka lapse .... Recycling....and lapse
with in one year.....

Policy Servicing
• OTHER nominations must be check
• Policy document handed over to agent
• Without Policy bond properly check all
documents as C.O Guidelines

Finance and Accounts
• ✓Timely opening of Cash Counter
• ✓Record keeping of OR used, Cancelled, Mutilated,
Transaction cancelled required to be Improved
• ✓Office order of Keys and FPSO and other not issued
• ✓Correspondence with banker and pick up vendor
missing
• ✓Timely Dispatch of CD Advices not done
• ✓Surplus-Reconciliation- Cash In Transit in some
units lacking

• Alteration in cheque, E.g. Name and amount in the cheque
altered
• Late lodgment of cash collected
• Lack of control on receipt stationery- stock register not
maintained properly
• Inadequate control on cancelled transactions and safe
custody of cheque books
• Issue of fresh cheque against stale cheque without proper
care
• Cheque favouring LIC of India from Cheque cancelled a/c
and policy payments misused- Fresh cheque drawn and
used for payment of unrelated policyholders premium or
fresh proposal

Finance and Accounts contd.
• Fake currency notes of huge amount detected in cash counter.
This may be due to replacement of legitimate currency by fake
currency
• Recycling of death/maturity /SB claims to third party. Cheque
pertaining to claims issued in favour of LIC of India and used to
pay premiums or proposal deposits of unrelated parties.
• Cheque issued without validation of vouchers leading to double
payment
• Misuse of cheque leaves to issue cheque in personal name
without validation.
• Bank reconciliation is adjusted and opening balance of certain
account codes are altered to tally the Trial Balance
• Unused and incorrect Cheque books lying in the stock of cheque
books.

ACCOUNTS
• All JV and adjustment vouchers check at Claims
and Accounts level
• To check whether Third Party cheques accepted
especially for premium accrual of many
policyholders but cheque issued in the name
Agents and after CD and again represented into
Banker for insufficient fund for premium
accounting
• All JV and adjustment vouchers check at Claims
and Accounts level
• Accounts-All Bank Reconciliation check with
accuracy@100%

ACCOUNTS
• All PAN verified with entered in PAN master if
Receipts exceed of Rs.50,000/-in a year or
Rs.2,00,000 in a year for Receipts and/or
adjustment level
• All transaction cancellation action is a genuine
reason and proper supporting records required for
Audit Trails
• In case of CD,cancellation charges of proposal
recovered as per prescribed circular especially in
case of NB CD along with charges +GST
• All representation of cheques checking
level@100%,so that male practice avoided
especially in case of Jeevan Shanti and Annuity
related receipts10/24/2020 rravindrakumar@gmail.com 30

• Direct credit is accounted on the same day or very
next day after verification of UTR No. along with
reference letter from recipient,so that in between
this time claims paid correlation for premium
accounting
• Cheque book always in the name of LIC of India
being statutory corporation
• Checking of all accounts of unclaimed
accounts,cancelled accounts etc...
• All Bank Reconciliation check with accuracy@100%
• Cash credit is credited in collection on the same day
or next day and cheque paid in but not realised
within at least 7 days credited especially in case of
annuity cases ratification10/24/2020 rravindrakumar@gmail.com 31

Example of Negligence

• Cash credit is credited in collection
• on the same day or next day and
• cheque paid in but not realised within
• at least 7 days credited especially in
• case of annuity cases ratification

Points of concern in Claim
Department
====================
• ✓Timely payment of IPP cases not being done
• ✓Rough data sheet not signed, Discharge Voucher
found blank
• ✓SB due after Revival not taken care of
• ✓During payment without policy all formalities not
checked/done
• ✓Under open title cases all requirements not being
checked to avoid legal issues in future
• ✓Policy bond under free Cover plan like 89-111-
149-150-179-174-801 not sent back to PH after
payment

CLAIMS
• Check all cases of recycle of claim
• Unclaimed /CSBO payment to correct party.
• Waiver of LET as per CO guideline
• Frequent change of Nomination.
• Checking of all LIC Cheques recycling of claims
• All Death Claims, without policy or without EDMS
Dockets check
• Checking of all LIC Cheques recycling of claims
accounts,cancelled accounts etc...
• All Death Claims, without policy or without EDMS
Dockets check10/24/2020 rravindrakumar@gmail.com 37

CLAIMS
• DVM checking
• Maturity and Death claims calculation required for
excessive payments especially for FAB, Additiinal
payments etc....
• .To check whether SB paid after death with death
dockets
• To all unclaimed accounts checks in manually entry with
payments
• To check all green vouchers payment of claims
payments Reversal of NEFT returned and rejection
accounts in time at BO level specially in SB.

CLAIMS
• Checking of all LIC Cheques recycling of
claims
accounts,cancelled accounts etc...4.To
check SOP@100% followed as issued by
• Cheques in favour of LIC of India so
Checking of. 100 % of All cheques.

Points of concern in PS Department
====================
• ✓Releasimg of Poicies after full repayment of loan
• ✓Functions as per guidelines of Citizens charter not
done
• ✓Proper councelling not being done to persuade PH
to abstain from Surrender
• ✓Time lag in issue of Duplicate Policy
• ✓AFM list of DAB remove and Add,PWB removal not
attended

POLICY SERVICING
• System check for rate of interest on Loan vis-a-vis
Interest on unpaid premium-System Audit Trail
required
• Neft creation as per CO guideline.
• All RFM check with Records, Loan purification,Loan
reconciliation check for all months,
• TDS check for section 194DA,NRI payments etc...

Policy Servicing
• Payment of Loan:
– along with the history of RFM 93 { correction in master details such as
Prem., Sum Assured, Plan/Term }
– on the basis of frequent requests of duplicate policy received from a
agent.
• Payment of Surrender value:
– along with history of RFM 93 { correction in master details such as
Prem., Sum Assured, Plan/Term },
– on the basis of requirements of lost policy
• Reduction in O/S loan by way of RFM without supporting documents
• Change in address/ECS details/NEFT master without request from P.H.
• Refunds debiting Renewal prem. A/C
• Lack of control on undelivered policy bonds for reassignment after full
repayment if loan

IT & EDMS
==========
• ✓Register of Output generated and handed over to
user un updated
• ✓Tagging of IP address
• ✓Network equipment are kept in open space instead
of in closed enclosure
• ✓Log file not being validated by all HODs
• ✓EDMS error log not provided to user for further
action

IT/EDMS
• ✓Non used hardware AMC
• ✓Monitoring of lifting of Incremental lots lacking
• ✓Hardware as per HCT and physical Asset
Register not tallied

Chief Life Insurance Advisor
• Completing fake polices to get undue advantage
• Lack of control on use of Premium point password
• Retention of policy bonds by Agents
Bancassurance & Alternate Channel
• Business canvassed by Bank but completed under
Individual Agency
• Business completed by Bank recycled under Individual
Agency
Senior Business Associates
• Delay in depositing the premium amount

• Micro Insurance
• Collection of premium from policyholders without acknowledgement in the
pass book and not remitting the same in the office.
• Making fake entries in the policy holders pass book without actually
receiving the premium to obtain fabricated claims.
• Taking advantage of fraudulent/suspicious background of the MI Agent
under whom they work and claiming wrong benefits under the policies
• Delay in remitting the premium collected from policy holders.
• Proposing Insurance on the lives of persons who are non-existent to lodge
death claims with forged Death Certificate at later stage.
• Not handing over the original policy document to the policy holder and
subsequent surrender of policies without the knowledge of the policy holder.
• Adjusting Renewal premium towards New Business for inflating the NB
figures.
• Splitting of policies without the consent of the proposer.
• Issuance of policies without proposal form.

Point to Ponder
• last few years there is no growth in no of policies. Hence
we should Firstly identify branches where there is more
than 10 % increase in non early claims in last few years,
All their death certificates are genuine or not can be
confirmed or checked especially in certain pockets or
areas ( reinsurance companies have shared the data
where the fraud is more. I can give that but it was given
by them in 2018) we can hire some agencies may be. All
these fraudsters test the method and where it is weak do
more Fraud. most private life insurance have helped
mathematical model where high risk life is investigated
at NB stage and secondly they use CIBIL data ( I think
LIC is thinking of using it also.)

Case Study 1
• Facts of the fraud: Cancellation of premium
transaction without policyholders’ knowledge
and amount misappropriated.
• How the fraud was perpetrated:
1. After receipt of cash towards premium from
policyholder at Satellite Office, and after
printing of the Original Receipt, another receipt
would be printed by keying in option as “No”
for the query “Whether printing successful?”.
The duplicate/ original receipt would be
handed over to the policyholder.

Case Study 1 (contd.)
2. Subsequently, the parent branch would be asked orally to
cancel the transaction. The amount would thus be
misappropriated.
• System inadequacies/ Violation of procedures:
1. Only 2 officers posted in the SO, including the Branch
Manager, while transaction cancellation required three
passwords, 1 Cashier and 2 Core.
2. In the absence of any one officer, the other was relying on
the Temporary Cash Officer , posted at the SO since its
inception, for functioning, and he had taken undue advantage
of the situation.
3. In violation of procedures, cash counter was manned by the
Temporary Cash Officer After printing of duplicate receipts,
he would orally communicate to the parent BO, sometimes
through the AAO, for cancellation of the record.

• After cancellation by the parent BO,
they did not insist for written
confirmation from the SSO.
• Control register for cancelled
transactions was not being maintained
at the SO. Cancelled transactions were
not verified by the AAO/BM of the SO or
at the PBO.
• Receipt reconciliation was not done/
register was not maintained.

Case Study 2
• Facts of the fraud: Fake death claims
submitted by an outsider, with connivance of
CM Club agent, on high risk policies held on
his and his family members’ lives. Total
amount of claim paid Rs.10053063/-.
1. False birth certificates, ID proofs and photos
(attested by CM Club agent) were submitted
towards proposals under high risk plans on
the lives of the proponent and his family
members.

2. After premium was paid for 4-5 years, fake death
certificates and claim forms were submitted to the
office. Since claims were non-early no investigation
done. Claim cheques were collected by the agent or
by his assistant.
3. After a sufficient lapse of time, fresh proposals in
the names of the deceased policy holders’ were
again submitted for high risk policies, at the same
and other branches.
4. The fraud was detected only because in one case,
though the policy was being serviced in a
metropolitan city, the death certificate was not
computerized, but was hand-written, and hence was
verified.

1. Investigation did not reveal major violation of
procedures/ system faults at the time of
underwriting or payment of death claims, which
would have resulted in perpetration or non-
detection of the fraud.
2. However, the large number of death claims for high
risk plans under a single agent could have raised
suspicions.
3. Suggestion made by Vigilance dept. of the Zone to
verify all death certificates in case of high risk
plans even in non-early claims.
4. (At the time of registration of proposals it is
possible to search policy master (exit policies) for
same name/DOB with status Death claim reported?
YES WE DEVELOPED INHOUSE AT AUDIT).

Case Study 3
• Facts of the fraud: 13 policies completed
under Market Plus (all for Single Premium)
under a Corporate Agency (a nationalized
bank) for total Face Value of
Rs.10,92,00,000/- and immediately
assigned (absolute) in f/o the bank. After a
period of 1-2 weeks of assignment, the FP
cheques were dishonoured and policies
cancelled. Complaint received from CVO
of the bank.

1. The 13 policies were procured at different
branches of one Division by the same
Corporate Agent, on the lives of members of
the same family.
2. All the policies were immediately assigned in
f/o one branch of the same Corporate Agent
(the Bank).
3. The dishonoured cheques were received at
our branch offices after a long time. There
was delay in taking CD action, and in one
case the cheque was represented.

• System inadequacies/ Violation of
procedures:
• There was some delay in taking CD action;
but in all cases the assignment in f/o the
bank had already been done before cheque
was received back. There is no obligation on
the part of LIC to await realization of FP
cheque before registering assignment.
• As per Bancassurance NB, the Agent is
required to remit the FP thru’ Pay Order
debiting the customer’s A/c which precludes
the possibility of FPCD. In the instant case,
FP was remitted by the Agent thru’ cheques
issued by the policyholders drawn on other
banks.

• Though the cheques were of large
amounts, the branch did not follow up
with its Banker for confirmation of
realization of the same.
• After taking CD action, the branch did
not immediately inform the Assignee
Bank (Corporate Agent) about
cancellation of the policies assigned in
their favour.

Case Study 4
• Facts of the fraud: Misappropriation of
Premiums collected from Micro Insurance
Policyholders.
• As per IRDA guidelines NGOs having three
years proven track record of having worked
with marginalized groups are to be granted
agencies for sale of Micro Insurance Policies.
• The specified persons appointed by NGOs
are eligible to procure New Business as also
collect Renewal Premiums from existing
Policyholders.

• These specified persons are authorized to
issue temporary receipts and in addition to
this are provided with pass books wherein
they have to register each and every
payment received from policyholder and put
their signature of having received the
amount along with date of receipt;
• NGOs while granting agency give guarantee
that the premiums collected by their specific
persons will be deposited with LIC within 24
hours ;

1. The specified persons on collecting the
renewal premiums from Micro Insurance
policy holders used to deposit the same
with clerk of the NGO in his Office;
2. The said clerk in turn used to deposit
renewal premium so received with LIC;
3. However over a period of time only part of
the renewal premium received was
deposited and the rest was misappropriated
in connivance with President of the NGO;

procedures:
• There is no provision where LIC issues
receipt for renewal premiums received
directly to Micro Insurance Policy holders.
• As such, it is imperative that LIC addresses
this inadequacy in system by issuing
premium certificates to individual Micro
Insurance Policyholders as against sending
the same to Micro Agent only.
• Lack of monitoring by MI Dept. of the
Divisional Office.

Case Study 5
• Facts of the fraud: Short Lodgment of
cash/Misappropriation of cash
1. LIC has introduced the concept of Satellite Office
opened in areas with no presence of LIC and/or areas
far away from LIC branch office for servicing aspects
i.e. mainly collection of renewal premiums;
2. The said Satellite Office is staffed with two Class I
Officers out of which one is from Marketing side who is
also in-charge of the Satellite Office and deals with
procurement of New Business and another from
Administrative Side who collects renewal premium and
deals with other day to day functioning of the Satellite
Office;
3. The said Satellite Office is connected with its Parent
branch office through Net with limited options available
at Satellite Office i.e. collection of renewal premiums,
registration of new proposals and completion of
policies under “Green Channel”;

4. Due to unique structure of manpower
available in the Satellite Office the
Officer from Administrative Side who
discharges duties of Cashier does the
same without any supervision and
has access to both the keys of the
safe box;
5. In one of such Satellite Office the
Officer from Administrative Side
misappropriated an amount of Rs.38
Lacs over a period of six months.

Case Study 5(contd.)
1. The Officer from Administrative side used to collect
renewal premium in cash and devoid of any supervision
from another from Marketing Side used to retain a part
of cash component ranging from Rs.24000/- to Rs.4.94
Lacs with him and used to remit the same after a delay
ranging from one day to sixty one days;
2. Emboldened with non-detection of this temporary
misappropriation he further misappropriated an amount
of Rs.38 Lacs by preparing fake pay-in-slips of our
bankers;
3. The above mentioned misappropriation was detected
during the reconciliation of Account No.3 by Manager
(F&A) who noticed outstanding cash credits pertaining
to Satellite Office;
4. Pursuant to investigations carried out the above
mentioned Officer admitted to misappropriation and has
now remitted entire amount misappropriated.

procedures:
• Lack of supervision of day-to-day
activities by another Officer posted in
Satellite Office.
• Delay in bank reconciliation, delay in
action on outstanding items, by the
branch.

Case Study 6
• Facts of the fraud:
• Completion of 627 policies by Development
Officer (also SBA) using NB password
allotted to him.
• During a period of over a year, the DO was
granted password to NB and Sales modules.
• 627 policies were completed using his
password by violating prescribed
underwriting procedures, thereby earning
him Rs.3,60,339/- as IB and payment of
Rs.28,89,372/- as commission to agents.

Case Study 6 (Contd.)
• Out of these 138 proposals were completed
by keying in Medical Examiners’ codes, even
though no examination was carried out.
Payment was done to ME for these proposals
without examination.
• For 489 proposals, proposals were
completed without submitting proposal
papers to the branch and thus without
underwriting decision. Dockets not available
in branch
• 39 proposals were required to be referred to
higher offices for decision on account of
Special Reports. However, all proposals,
including one on the life of the DO, were
completed without Special Reports.

• 17 recycling cheques issued in f/o LIC of India were
collected by him, taken out of the branch, and
accounted for at his SBA office, out of which 4 were
accounted against fresh proposals of 3rd parties.
• Development Officers are to be given access only to
OS menu with visitor status. However, in the instant
case, NB and Sales passwords were allotted to him.
• Some of the policies were completed at SO of the
parent BO. At the time of issuance of policy bonds,
the officials signing the bonds have to check the
details with the decision on review slip and the
proposal papers, to ensure that all requirements are
fulfilled and all clauses are attached as per
underwriting decision. This was not done.

• Cheques drawn in the name of LIC of India
towards new proposals are to be accounted
at the branch itself, and should not be
allowed outside. However, here several
cheques were accounted by the DO at his
SBA office, with some towards 3rd parties.
• There was no control at the parent BO/ SO as
far as scrutiny of proposals, issue of bonds
and preparation of policy dockets were
concerned.

Case Study 7
• Facts of the fraud:
• 3rd party cheques submitted by CLIA
agent of a branch towards BOCs, would
be returned dishonoured ; however,
cheques would be represented.
• Loan cheques/ death claim proceeds
diverted by the same agent towards
BOCs without consent of
policyholders/ claimants.

• The said CLIA agent used to deposit third
party cheques on behalf of agents under her
organization and creating Block BOC
deposits and large number of policies were
booked by adjusting such deposits.
• The third party cheques deposited invariably
returned as cheque dishonored.
• The branch official/s instead of taking
immediate CD action used to represent such
cheques on the insistence of the Agent and
delayed credit was received after multiple
representations.

• The agent started diverting the loan cheques
towards proposal deposit and adjusting new
policies thereon without permission of the
policyholder.
• Large number of policies numbering
approx.265 were completed under Jeeven
Arogya plan by misusing loan cheques
drawn in the favour of the policyholders.
• Thereafter death claim proceeds were
utilized for partially booking new policies in
the name of the nominee and his/her children
and part of the amount was utilized for
adjustment of new policies without the
permission of the claimant.

• The agent could influence senior officials of the
branch and division. Manager (CRM) on QMA visit to
branch office allowed re-cycling of death claims in
violation of circulars ref.: CO/CRM/676/23 dated
15.07.2008 & Co/CRM/865/23 dated 30.06.2012 issued
by ED (CRM) and circular letter ref.: CO/CRM dated
17.01.2011 issued by the then MD & present
Chairman.
• The above mentioned action of Manager (CRM) lead
to misappropriation of Rs.41000/- for booking of 40
SSS policies.
• The SSS policies were completed without the
knowledge of the policyholders and the signature of
the policyholders have been forged and the
signature in the SS authorization forms and the
proposals differ and no policy bonds have been
issued.

• In another instance of such undue influence of the
agent on the officials of the branch and division, the
BM (CLIA) & Manager (Sales) (on deputation to
branch office since the BM was on tour for training)
had approached the HOD NB of the parent branch
office for completion of 430 Jeevan Arogya policies.
• However in the absence of proposal forms,
requirements of KYC norms, no proofs of proposal
deposits the employees of the parent branch office
refused to process the papers.
• Thereafter both the above mentioned officials got the
proposals completed at the SO. No policy bonds
have been dispatched for the same.

• Policies of this agent which normally should
have been referred to Divisional Office have
been completed at branch level; however no
underwriting decision and/or underwriters
signature is available.
• In some cases Age and/or Occupation Extra
was not charged as also FMR not called for.
In all such cases there was no underwriting
decision and/or underwriter signature.
• The agent was thereafter issued fake
premium receipts from the Premium Point
allotted to her.

procedures:
• The administrative staff in the branch office
did not play their role properly and did not
follow laid-down rules and regulations.
• It is understood that the administrative staff
were under duress since the agent flaunted
her contacts with higher ups.
• During this period Division had floated
various competitions for agents. The branch
in-charge succumbed to the pressures of his
higher-ups.

• In order to generate maximum number of
policies and premium all rules were thrown
to the wind and the maxim of “ By Hook or
Crook” was utilized to its fullest for
achieving branch targets;
• This type of activities cannot take place if
supervisory officials at branch and or
division ensure that rules and regulations
along with discretionary powers are
exercised strictly and judiciously for the best
of the organization and not for any
individual.

Zero Tolerance Areas For
Prevention of Frauds
• 1: NEFT Registration Validation in NB PS
• 2: Inward Out ward Module in OS
• 3: Account Reconciliation in 2 and 3
• 4: JV and Cancelled Receipt Specially CASH
Transaction
• 5: CDA in A/c and NB Specially Annuity Policy
• 6 BOC Adjustment in NB
• 7: Cooling Off of Policy
• 8.Tax matters check@100% with circular,if reported leakages
• 9.OS-Statutory payments check,Like Minimum Wages Act,,ESI Act
etc

Fraudulent Death Claim

To Be Investigated
• Fraudulent Death Claim of Parag R Parekh Some
Basic Questions on System Violations
• 1: Son of LIC Employee Taken Agency Under DO
Thakkar to be investigated
• 2: All Policy Holders Record
• 3: All Loan SV and Transfer out Policies to be Scanned
4: 25 Lac Policy on Term Insurance Taken in 2012
• 5: Maker Chekar and Approver of Br 14 Ahmedabad to
be checked and investigated for Transfer out of Policy
• 6: Gandhinagar Branch Transfer in All maker Checker to
be investigated

To Understand
• Party Died in 2011 and Agent Take Insurance and After 3.1/2 years
in 2014 Giving Digitally Forged Manuplated Death Certificate As
this was Non Early Death Claim LIC Pass the Claim. The whole
conspiracy was Fabricated by DO who was Chess Champion. LA
was Cousin Brother of DO.
• #Claimant and Widow of Deceased LA Got the Job on
compensation.
• # Claim Money Deposited in Claimant's Joint Account with DO
• # DO is under Suspension and absconding from Police as LIC File
FIR against Agent and DO

Be Suspicious
• Party Died in 2010 and Agent Agent Take Insurance
and After 3.1/2 years in 2013 Giving Digitally Forged
Manipulated Death Certificate As this was Non Early
Death Claim LIC Pass the Claim. The whole conspiracy
was Fabricated by CM Club Agent who used this
Modus Oprendy in 7 to 8 Cases Agent is Suspended
with Forfeiture of Renewal which was More then 10 Lac
Per Year DO took Promotion as ABM Retired Happily
after 2 years from other Division

“ Our job is to educate people/staff to be
alert and watchful, help better moral
standards and adherence to systems and
procedures”

84
R.R. RavindraRavindra KumarKumar
Regional Manager
LIC OF INDIA
Western Zonal Inspection Centre
rravindrakumar
rravindrakumar
rravindrakumar.mop
+91 9726351246 Only Or
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