IRDAI implements strict rules to combat insurance fraud after data breaches
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed stricter regulations for insurance companies following recent data breaches, notably involving Star Health Insurance. New guidelines require firms to adopt an anti-fraud policy, establish independent Fraud Monitoring Units (FMUs), enhance cybersecurity, and conduct regular awareness programs. These measures aim to combat identity theft and financial loss associated with cyber fraud, ensuring better protection for policyholders and the integrity of the insurance industry.
In the wake of recent data leaks and online fraud incidents involving companies like Star Health Insurance, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed stringent rules to curb fraudulent activities in the insurance sector.
Under the new guidelines, insurance companies will be required to adopt an anti-fraud policy that must be approved by their boards. Additionally, they will need to establish independent Fraud Monitoring Units (FMUs) to oversee and manage fraud detection and prevention. Enhancing cybersecurity measures is also crucial, alongside conducting regular awareness programs to educate stakeholders about fraud risks.
According to IRDAI, cyber fraud can lead to severe consequences, including identity theft, financial loss, and reputational damage. Criminals often attempt to steal sensitive information, such as KYC details and financial and medical records, which can be misused for illegal activities. Recently, Star Health Insurance faced a significant data breach when a hacker named xenZen offered to sell the leaked customer data for $150,000 or in smaller portions for $10,000 on Telegram, raising concerns for policyholders.
To reinforce their stance against fraud, IRDAI has mandated that insurance companies adopt a zero-tolerance policy towards fraudulent practices and strengthen their internal controls and investigative procedures. The newly established FMUs will collaborate with a Fraud Monitoring Committee and report quarterly to the risk management committee to ensure comprehensive oversight.
Moreover, insurance firms must bolster their cybersecurity infrastructure to protect sensitive data and enhance their capability to detect fraud risks through digital channels. Regular audits and the implementation of advanced technologies will be essential in these efforts.
IRDAI also emphasises the need for ongoing awareness programs for employees, agents, and policyholders to foster vigilance and transparency within the insurance industry, ultimately reducing the threat of fraud. The authority aims to enhance security and awareness, equipping insurance companies to better combat online fraud.
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