The insurance market is a dynamic sector offering increasingly sophisticated products to its customers and providing competition to other segments of the financial services industry.
The global insurance sector’s growth over the last few years has been tremendous. Unfortunately being a dynamic market with so many products makes this industry vulnerable as it is attractive to fraudsters.
Insurance fraud is often perceived as being different from other types of crime as it is seen as a victimless crime - no one is directly harmed. In the overall scheme of things, the making of a false claim or the exaggeration of a genuine claim by a few thousand shillings is seen as the proverbial drop in the ocean of the insurance companies’ finances. However, the reality is very different. While most claims are genuine, an ever increasing number of people make fraudulent and exaggerated claims.
The types of insurance fraud are wide-ranging, from criminal gangs who engage in fraud rings to the individual who exaggerates a claim on their policy to get more money from their insurance company. The individual can purposely provide false/incorrect information to gain lower insurance premiums. Insurance fraud could cover anything from motor vehicle to household/personal insurance.
This is a significant problem, and insurance companies and industry bodies, such as The Association of Kenya Insurers (AKI), are making efforts to deter such activities.
Recently, AKI introduced a virtual motor insurance certificate to curb insurance-related fraud in the industry. The digitisation of the insurance certificates will break an elaborate motor vehicle fraud scheme that has been robbing the industry millions of shillings through fake multiple claims.
This shift to virtual certificates will help curb motor insurance fraud by ensuring that only one motor insurance certificate is issued per vehicle. Cases of double insurance, fake certificates and stolen insurance certificates will be eliminated. The virtual certificates will also save insurance companies the cost of physically delivering the certificates to their customers as they will receive the virtual motor insurance certificate on a digital platform.
The need to use technology is essential to combating insurance fraud as fraudsters are getting more sophisticated.
In this digital age, people expect instantaneous results and to be able to complete applications and claims online from start to finish. This can also be exploited by fraudsters and therefore the insurance industry must embrace a layered technical defence system.
The future of tackling insurance fraud is in using new technologies to thoroughly look at ways to recognise and predict emerging fraud trends and patterns and take preventative steps. Only then do we have a hope of staying one step ahead or at least at par with the fraudsters.
Also, the fight against insurance fraud requires a collaborative approach between all stakeholders.
Bharatan is Chief Executive Officer, APA Insurance