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.