Insurance fraud rises

Published: 04 February 2014

After a decade of economic recession and an ensuing liquidity crunch, a steady growth of sophisticated white collar crimes, corruption, pyramid scams are on the rise.

Property and estates fraud among other organised crimes have found their place, as citizens desperately seek to make ends meet in a difficult economic environment where company closures and retrenchments have became the order of the day.

Unlike many white collar crimes, insurance fraud has become a cancerous infection the insurance industry is battling with. This is mainly because within the insurance industry, fraud is perceived as a victimless crime where no one is hurt.

In an interview, Nicoz Diamond managing director, Grace Muradzikwa said many claims that were settled by insurance firms could be fraudulent.

"Roughly at least 15-20% of cases that are settled by insurance companies are fraudulent claims. These may be claims where individuals inflate the cost of repairs, slick in pre accident damages," she said.

She added that instances where people bought insurance cover after an accident, or drove without licences and were involved in accidents were driving insurance.

She said fake police reports were also being used to justify accident claims.

Muradzikwa said lack of official statistics on insurance fraud remained an issue that required urgent quantification and research. Speaking at an Insurance Council of Zimbabwe (ICZ) workshop recently, Baobab Insurance operations director, Tarupiwa Tarupiwa said even though statistics were not available on insurance fraud, insurers were well aware of the growing scourge.

"Many insurers accept that a lot of fraudulent claims are settled by them every now and then. Some are even aware of the various methods used to perpetrate this fraud," he said.

Taruvinga said most insurance fraud happened on the revenue and payment cycle – on premiums and on claims.

He added that the submission of false claims or exaggerations of genuine claims were drop in the ocean of finances of insurance companies.

"The types of insurance fraud are very diverse and occur in all areas of insurance ranging from slightly exaggerating claims to deliberately causing accidents.

"Chances of disgruntlement employees will cooperate with fraudsters given the inadequate controls in organizations that fraudsters capitalize. This has been worsened by a decline in ethical and moral standards in the business and general communities," he added.

Insurance fraud effects are felt by many through increased premiums, reduced profitability of insurers, corporate or insurance failure, insurance bankruptcy amongst several.

Those who commit insurance fraud view it as low risk but highly lucrative business.

It is believed that insurance fraud costs the USA around $100 billion every year while in South Africa, the costs were between R1,2bn and R5,25 bn.
- zimmail