Fraud costs insurance industry $165 million
The local insurance industry is losing close to $165 million annually through fraudulent activities being perpetrated in the sector, Insurance and Pension Commissioner Tendai Karonga said.
Insurance fraud occurs most often when an insured individual or entity makes a false or exaggerated insurance claim, seeking compensation for injuries or losses that were not actually suffered. Insurance fraud can also be committed upon customers, through the sale of unlicensed or bogus insurance coverage to unsuspecting clients, or an insurance broker or agent’s diversion or theft of insurance premiums paid by clients.
Speaking at a funeral assurance fraud breakfast meeting yesterday, Commissioner Karonga said Insurance Fraud has increased in recent times because of the increased complexity of the insurance business coupled with the rise in cyber-crimes.
“The entire industry collects about $550 million a year and is losing close to 30 percent annually as a result of different fraudulent activities. Consequently, industry growth and profitability is under serious pressure and this threatens sustainability of the industry.”
He said there were several types of insurance fraud.
“For instance, there is Syndicate Insurance Fraud (short-term insurance). Between 2009-2013, Air Zimbabwe lost over $10 million through a well-planned insurance fraud syndicate. The same type of fraud is prevalent in the pension fund industry. Locally, in 2014 Local Authorities Pension Fund Accountants connived with the then Kingdom Bank employees to swindle pensioners over $900 000.
“Another type of fraud that is prevalent in the country is that of Exaggerated Claims. In the first quarter of 2015, First Mutual Holdings received over $1,5 million of fraudulent health insurance claims. Main cases were exaggerated claims by service providers.”
He said overall, such fraudulent activities affect the role of the insurance sector as a source of long term investment as this means that less will be invested in infrastructural development and Government borrowing,” said Mr Karonga.
He highlighted that the insurance industry needs to fight growing risk urgently through various ways as it depletes the insurance pool thereby exposing the insurers.
The commissioner implored players in the industry to improve their internal processes by enforcing water tight claim processing, internal control systems and encourage use of reputable claim adjusters as well as upskill claims handling personnel.
“As a regulator we want players to tighten their internal control systems, accounting, auditing, claims processing and the quality of staff that they employ,” he said.
Different players at the occasion also bemoaned the laxity of rules governing the insurance industry sighting that people are finding loopholes in policy aiding to high levels of fraud.-herald