
Zimbabwe will soon set up a unit specifically to prevent and investigate cases of insurance fraud which is on the rise in the country, an official has said.
Insurance fraud refers to cases in which individuals lie to an insurance company to get financial compensation for something they would not have received had the truth been told.
There are various forms of fraud which include fictitious car accident or death claims, exaggerated claims and backdating of insurance claims.
A common false claim relates to individuals who only insure a car after it has already been involved in an accident and then go on to make an insurance claim after backdating the incident.
Former Zimbabwean representative in the Big Brother Africa show, Wendall Parson was in 2013 cleared by the courts after he was arrested on allegations of having made a false claim in which he was paid compensation for his vehicle which was involved in an accident.
The insurance company claimed the car had been insured after the accident had occurred.
While exact statistics on the insurance fraud cases are not available, officials in the industry say there is a general upward trend in such cases in the country.
In the past few years, it was estimated the industry was losing in excess of $165 million annually through various forms of fraud.
Estimates put the number of fraudulent claims at between 30 to 40 percent of total claims that insurance companies deal with every year.
Old Mutual Zimbabwe business development manager, Immaculate Musonza said the insuring public “is not so honest.”
“The moral risk in Zimbabweans is getting very high everyday unfortunately, maybe it’s because of the economy,” she said.
In an attempt to thwart fraudulent claims as well as to investigate them in case prevention has failed, the insurance industry has firm plans to establish the Zimbabwe Insurance Crimes Bureau (ZICB).
Education and public awareness to prevent such cases occurring would be the major aim of the unit.
“We are setting up an independent bureau to assist the industry to prevent (fraud) and if they do happen, then investigate the cases,” said Insurance Council of Zimbabwe (ICZ) technical manager, Nicholas Sayi.
He said it had been expected that the unit would have been operational by now but was likely to be in operation by the end of the second quarter of this year.
At the moment, insurance companies are using internal teams to investigate cases of fraud.
Experts in the industry say those with experience in dealing with insurance claims can easily identify a potential fraudulent claim by noting “red flags” in it.
Once a potentially fraudulent claim was identified, Musonza said “we try to talk to the client first to encourage them to withdraw the claim.”
If this fails, the case is then taken to the police and goes to court.
Internal investigation units are expected to work hand in hand with ZICB when it is operational.
Officials in the industry have also questioned the conduct of police officers, accused of sometimes issuing reports which are used to make fraudulent claims without establishing the facts.
In the Wendall Parson case, it came out in the courts that a named senior police officer was singled out for having connived to change dates in which an accident was said to have occurred to justify an alleged false claim.
Because of complexities involved in the cases, officials note that in most cases insurance related crimes have not found their way to the courts.
Payment of false claims has an overall negative impact on the industry as it not only increases the cost of insurance to society but also impacts on the growth and profitability of the sector, Insurance and Pensions Commission (IPEC) chairperson Tendai Karonga has previously said.
“Insurers may be left without capacity to underwrite because of this fraud in the process exposing genuine customers because you will not be able to pay their claims on time,” he said. – New Ziana