Fraud Bleeding Zimbabwe Insurance Sector

By Tariro Guwira

Mutare-Dishonesty in general and fraudulent claims in particular are costing the insurance industry huge losses, the Insurance and Pensions Commission (IPEC) has said.

IPEC,insurance, pension and providers funds commissioner, Dr Grace Muradzikwa speaking during a virtual launch of the 2021 IPEC and National Social Security Authority (NSSA) Journalists Mentorship Programme (JMP) recently she said insurance fraud claims are estimated at up to 20 percent of claims causing underwriting losses and worsening loss ratios in the industry.

“The insurance industry has been upset by fictitious car accidents or death claims, exaggerated claims and backdating of insurance claims of which it undermines growth and prosperity by capturing markets, siphoning resources away from the formal economy, draining economic productivity, and undermining the tax base,” said Dr Muradzikwa.

She said this has been undermining the confidence insurers had in their clients over the years.

“Back then we relied more in the insurance principles which are insurable interest, utmost good faith, indemnity, proximate cause, subrogation, contribution and loss minimization of which clients did not have to present evidence but increasingly there has been a great need to prove what clients present as assets.

“Clients present fake documents and they want to be indemnified whereby avoiding to make legitimate claims and dipping in where one did not contribute. When the insurance company pays one for their loss it means when one suffers a loss they get as close as possible to what one has lost,” she said.

Dr Muradzikwa said the industry is now developing strategies to deal with the vice.

“A broader strategic direction on how we engage service providers going forward has been put in place. We have a robust claims assessors system to do investigations and be able to unearth insurance fraud.

“We are aware that the Insurance Council of Zimbabwe (ICZ) is coming up with a claim platform to limit multiple claims were someone takes a policy with more than one insurance company and make multiple and perennial claims,” said Dr Muradzikwa.

White collar criminologist, Proctor Nyemba said fraudsters were taking advantage of yawning loopholes in the sector and encouraged by its inability to prosecute offenders.

“The Insurance industry has for a long time been riddled with loopholes and the perpetrators feel they are untouchable because they always get away with this white collar crime,” said Nyemba.
He said insurance fraud is a prevalent problem that receives little attention by the police and judicial system.

“This drain on society can be dealt with if insurers, insureds, and others raise their voices to point out the problem and be watchful about seeing that justice is done. A whistle blower policy can be used to mend the escalating cases of insurance fraud .It can be more useful if an incentive is added to it,” he said.
Nyemba said there was urgent need for research on the extent of the problem.
“We can start by scratching the surface on the true volume of fraud by having a survey and establish who the real culprits are because it could be vehicle owners, insurance agents, students or anyone out there.

“It’s a pervasive and enduring issue for the insurance industry. It is important that cases where fraud is suspected are effectively litigated and where fraud is apparent, there should be appropriate legal consequences to act as a deterrent,” said Nyemba.

Transparency International Zimbabwe (TIZ), Legal Assistant Tracy Mutowekuziva said insurance fraud is rampant and sometimes goes unnoticed and unpunished.

“Crimes like insurance fraud are centred on series of detailed investigations that has to be done and the prosecutor somehow is not quite vested in getting to the bottom of the issue.

“Hence many fraud cases end up with the perpetrators walking free because their lawyers are well vest in that particular area hence allowing fraud to thrive,” said Mutowekuziva.