Malawi hit by insurance fraud – IAM

Malawi’s insurance industry is hit by fraudulent activities, with 30 percent of all claims processed being false particularly in the motor insurance section, Insurance Association of Malawi (IAM) has said.

IAM president Dorothy Chapeyama disclosed this at an anti-insurance fraud training in the country’s commercial capital Blantyre. The training was among several others organized to find way of checking and dealing with the rampant fraud in the country’s insurance industry.

Chapeyama said although the trend is worrying there are still no solutions to the problem mainly because of lack of efforts by most companies to pursue cases concerning insurance fraud.

Staged accidents account for many fraudulent insurance claims
Staged accidents account for many fraudulent insurance claims

She said from the cost-benefit perspective, most insurance firms believe it is cheaper to pay such fraudulent claims than to challenge or investigate them further.
“Most companies think the process is lengthy, costly and cumbersome and, in most cases, unrewarding,” said Chapeyama.

She said another problem is that most insurance firms are reluctant to share information or just want to keep fraudulent activities under the carpet for fear of denting their business image.

“There is very little literature in Malawi on cases of proven fraud and although exchange of information would play a major part in the fight to stop fraud, statistics is not easily accessible despite an agreement at the IAM that members should be sharing statistics,”  said Chapeyama.

She said although there could be good reasons for this the problem was that when information is not shared or provided timely, it becomes a major obstacle to detecting fraud and taking action.

The training was organised by Business Development Facility (BDF). Industry experts fear that if the problem goes unchecked it would erode profit margins for insurance companies and pushes up premiums for consumers.

The experts contend that insurance fraud is a global occurrence that has resulted in insurance companies world over losing billions of money every year.

Experts say the trend was on the rise since in Malawi there is no legal obligation on insurers to resist fraudulent claims and prosecute perpetrators; hence, no cases of individuals or companies who may have been prosecuted under the charge of committing insurance fraud.

Chapeyama said unfortunately insurance fraud puts pressure on the business and costs are borne by policyholders and consumers since insurance companies charge higher premiums to cover their losses from fraud.

“Individual and business premium rates go up and businesses often pass on the increased costs to their consumers,” she said.

Experts have contended that insurance fraud has existed ever since the beginning of insurance as a commercial enterprise.

Insurance fraud can be hard or soft. Hard fraud is pre-meditatively perpetrated while soft fraud is opportunistically executed.

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7 years ago

This require urgent government resolve. If left like this, it is only going to fuel more hikes on insurance premiums as well as risk the general public from harm by uninsured drivers. True the cases ought to be referred to the police; however, the police will require financing possibly from the same insurance cover…as indeed any public damage incurred! These can be solved on a case-by-case basis. Insurance companies should desist from making payment without due process. This can only make it more profitable to some crooks who would resort to staging accidents with a view to making fraudulent claims.… Read more »

Fathi Shehab
7 years ago

my view is that when the indured hss not reported the insurance co should not pay…..that simple!
why are we not using formula per car usage(kilometers)performed. the more you use your vehicle the risker…also condider geographical boundary…. thank you.
inu ansurance mwatidyera xokwana noow pay us back if no claim in 24months or miles done less than 50000 per 48 months…food for thought yeah?

Anti Orange
Anti Orange
7 years ago

It is quite simple. If the majority of customers are to stupid to resist the cost of paying for all the fraudulent claims, it is easy for the insurance companies to do nothing. The sooner every honest customer complains the more likely they are to do something.

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