NO DEFENSE FOR DEFENCE

Corruption in defence hits the lowest strata of soldiers

Indian defence has always been looked up to with lot of dignity and honour. But then, this image of our defence being epitome of discipline and bereft of any vices, is under siege following series of scams and corruption scandals. The scams that subverted the image of our defence ranges from Bofors to operation West End to Adarsh Society scandal. Recently, more than five defence procurement companies were banned from doing business in India, after they were alleged with corruption charges.

The albatross of corruption has reached even the topmost person in the armed forces. While in office after taking over as the Chief of Army staff in 2010, a retired Lieutenant General, who was involved in Adarsh Society Housing scandal, bribed another official with Rs.50 crore to steer a heavy vehicle contract in favour of an East European supplier, instead of an existing Indo-Russian joint venture. This one incident speaks volumes about the extent of corruption that is slowly seeping into the ranks of our armed forces!

In the same lines, Central Vigilance Commission's (CVC) investigation on Border Roads Organization’s (BRO’s) Project Deepak unearthed evidences of lack of transparency, dearth of quality control, manipulations with tenders and use of inferior quality of materials in constructing bridges and roads. These substandard roads are alarming especially in the context of Chinese advancements in building world class infrastructure alongside the borders! The CVC report demonstrates financial irregularities in excess of Rs.100 crores, apart from shoddy work produced to build vital roads and bridges. However, no story would be complete without the mention of Operation West End. In this case, a notorious nexus between the ministers of National Democratic Alliance (NDA) and army top brass dovetailed to take bribes that eclipsed four per cent of tens of thousands of crores of total defence contract amount. Last year in January, a former army vice chief Lt-General was found involved in a land scam that robed the government of 0.96 acres of prime defence land worth Rs.45 crore in the Pune cantonment area.

Given the fact that procurement and manufacturing of defence equipments are still not in private hands, such irregularities reflect the strong nexus between bureaucrats and veteran army personnel. In a number of cases, even top officials form organisations like DRDO were found involved in corruption and were later arrested. In case of DRDO which should be epitome of scientific development and politically-free work environment, it is just not about money, but more about opportunity cost and negative externalities that they create, in the process.

The sanctity of defence services, which is arguably the best kept government institution, is well and truly undermined. The retired army officers are often found colluding shoulder to shoulder with defence contractors in using their influence for them to get the deals in exchange of handsome bribes! It not only dents the image of defence services, that is ought to be the most clean and spotless organisation, but also comes as a huge loss to the nation. Most of the time, this embezzlement of funds and resources hit the lower most strata of soldiers. Be it scams in procurement of basic arms and ammunition or be it scams in purchase of technologically advanced fighter-jets, it is soldiers at the front and the common man at the rear, who have to pay – and pay with their lives!

CASHING ON CLAIMS

Frauds in of insurance have a huge social and economical cost!

The frauds in the insurance are nothing new but what is new is the alarming rate at which it has been growing over the past few years. The frauds range from clients’ registration through reinsurance to claims – which at times have been engineered by causing intentional loss of insured assets. The bottom line is that these frauds cost the insurance companies more than otherwise.

According to the research done by a Pune-based company called Indiaforensic – the total loss by all the players put together is a substantial Rs.30,401 crores during 2011, which is about 9 per cent of the industry size! IRDA facts show that sum total of premium received by the industry (all segments of insurance put together) in 2011 has been Rs.3.5 lac crores. The bulk of the brunt has been borne by life insurance sector with 86 per cent of the accumulated fraud, while the remaining is tagged to general insurance segment. Th e last 5 years witnessed increase of massive proportion that has doubled for life insurance and 70 per cent rise for general insurance – as 5 years ago total loss for life insurance companies was a staggering Rs.13,148 crores while for general insurance, it was Rs.2,140 crores.

There is no doubt that fraud in insurance is increasing which is reinstated by Ernst & Young survey as well. The survey findings have narrowed down the key exposures of fraud to 5 major ones. Out of all manipulations, fraudulent claims top the list with 27.3 per cent cases followed by frauds practiced during payment of premiums which was found in more than 21 per cent cases. In general insurance, the majority of the fraud revolves around health. As much as 25 per cent of health insurance cost is driven from manipulated claims. Insurance industry as a whole is plagued by usual malpractices that include commission rebating, fake documentations and collusion between parties. The mean ticket size of each fraud to an insurance company oscillates between Rs.25,000 to Rs.75,000. There is no doubt that the increased cost for insurance companies discreetly done by fraud is generally passed on to the policy holders. Whatever be the real figure, intense competition in the sector is always exerting downward pressure for the premiums even post factoring of the cost of fraud. However, in spite of these revealing data; IRDA, at least as of now, is refusing to take it seriously.

On the one hand, when 40 per cent of families in India is pushed below the poverty line due to out-of-pocket expenditure on health and where road accidents costs India 3 per cent of the GDP, then on the other, such fraudulent cases not only increase this economical and social loss but also robs many from genuine claims.

IRDA should urgently roll out guidelines catering to more transparency and simplicity in documentation. Besides, the insurance companies too should actively pursue anti-corruption strategies and techniques to arrest this problem. Government should further make the system electronic and automatic, with less human intervention, which in long run would speed up the process and reduce undercutting and pass backs. Cases of frauds in insurance sector not only are a cost to the nation but are a burden that is eventually borne by the stakeholders. It is time for government not only to secure all, but also make the system free from all rust.