HARARE – Zimbabwe is set to establish an independent insurance crimes unit to fight rising fraud claims amounting to $165 million annually in the country.
Over the past few years Zimbabwe has witnessed an increase in insurance fraud largely due to an increase in cyber-crimes and complexities in the insurance industry.
The Insurance and Pension Commission (Ipec) recently indicated that the local insurance industry is losing close to $165 million annually through fraudulent activities, which 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.
“The moral risk is getting high in Zimbabwe but there’s low prosecution,” Old Mutual Insurance Company business development manager Emmaculate Musonza told journalists at an insurance reporting workshop in Harare last Friday.
“Almost 30 to 40 percent of insurance claims in the country are fraudulent, and we are now working collectively as an industry to set up a bureau to handle that line,” she said.
In most jurisdictions, a national insurance crime bureau is supported by insurance providers and works in partnership with the police and insurance authorities.
The bureau’s major goal is to prevent and fight insurance crime by identifying and persecuting perpetrators and raising social awareness about the issue.
Common activities of the insurance crime bureau include performing investigation and data analyses, training and educating the public about insurance fraud and theft, and coming up with solutions to the widespread problem of insurance crime.
Teaching consumers how to recognise insurance crime and how to protect themselves against it is also a major preoccupation of the bureau — and the first step to the prevention of such crimes.
Musonza noted that several insurance firms collapsed in the past few years after succumbing to fraudulent claims.
“Our insurance public are not so honesty and this is resulting in high claims and this pose a major risk to insurance companies,” she said.
Insurance Council of Zimbabwe technical manager Nicholas Sayi said there is need for the insurance industry to fight the growing fraud risk urgently through various ways as it depletes the insurance pool thereby exposing the insurers.
“We are hoping to establish the Zimbabwe Insurance Crimes Bureau as soon as possible to assist the industry in reducing insurance fraud.
Our target is to have the independent unit operational before the end of this quarter,” he said.
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 United States of America around $100 billion every year while in South Africa, the costs were between R1,2 billion and R5,25 billion.
— The Financial Gazette