The Supreme Court has ordered every State to set up a dedicated Special Investigation Team (SIT) to investigate suspected fraud in motor accident compensation claims, after proceedings before the Court uncovered indications of a much wider racket involving allegedly repeated use of the same vehicle in different accident claims.
A bench of Justice Ahsanuddin Amanullah and Justice Prasanna B. Varale issued the directions on August 17 while examining a case that initially centred on whether a particular vehicle had actually been involved in an accident.
What began as a dispute over the identity of the vehicle gradually developed into a nationwide inquiry. During the proceedings, allegations emerged that identical vehicles were being shown in multiple accident cases and that compensation claims based on such records were being pursued despite circumstances suggesting possible fabrication.
The Court said the pattern indicated the possibility of fraud on a large scale and decided to widen the proceedings beyond the individual dispute.
The bench also highlighted the financial consequences of fraudulent claims. Such practices can place an additional burden on insurance companies and, in turn, affect genuine policyholders through increased premiums as insurers attempt to maintain their financial stability.
States asked to establish dedicated investigation teams
The Supreme Court has now directed every State to constitute a specialised SIT specifically for complaints involving potentially fraudulent insurance claims.
Insurance companies have been instructed to forward complaints indicating possible fraud to the concerned SITs. The teams are expected to examine such complaints promptly, while State governments have been asked to provide adequate manpower to ensure that investigations are completed without unnecessary delay.
The States must also inform the Court about the procedure being followed by their respective SITs while investigating such claims.
The Court further directed insurers to take additional steps in cases where a claim has been rejected because of suspected fraud or collusion.
In such matters, the insurer must immediately send the case details to the SIT in the State where the claim was filed. At the same time, the insurance company must conduct its own internal inquiry to determine whether any of its officers may have participated in or facilitated the alleged wrongdoing.
Proposal for a nationwide claims database
During the proceedings, Adv. Jagdish Chandra Solanki, assisting the Court, suggested creating a common digital platform containing motor insurance claim information.
Such a system could allow insurance companies to identify recurring patterns by checking whether the same vehicle, individual or other entity has repeatedly appeared in accident claims.
The proposed mechanism could also be integrated with existing VAHAN and SARATHI databases, potentially giving insurers a broader means of verifying the information supplied in accident compensation claims.
The Supreme Court’s directions seek to address not merely individual fraudulent claims but the possibility of organised and recurring manipulation of the motor accident compensation system.
By requiring both State-level investigations and internal scrutiny by insurers, the Court has placed responsibility on multiple stakeholders to detect fraudulent claims before they impose further costs on the insurance system and genuine policyholders.
