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FRAUD NEWS

Insurers lose RM500m a year to bogus claims

By Rupinder Singh - 21.01.2008

BOGUS insurance claims cost Malaysian insurers about RM500 million a year, according to Insurance Services Malaysia Bhd (ISM), an industry research firm.

ISM, which provides data-related services to insurance companies, said this works out to about 17 per cent of the total RM3 billion yearly claims.

However, ISM's chief executive Carl Rajendram said the figures are only estimates as the types of insurance fraud are very diverse and occur in all areas of insurance.

According to Dr Bassel Hindawi, president of the International Association of Insurance Fraud Agencies (IAIFA) and director general of the Insurance Commission of Jordan, the cost of insurance fraud worldwide is estimated to exceed US$150 billion (RM489 billion) annually.

They were speaking at the inaugural two-day Insurance and Takaful Fraud Conference in Kuala Lumpur yesterday.

The conference is jointly organised by ISM and the Malaysian Chapter of the Association of Certified Fraud Examiners (ACFE).

ISM, together with its 51 member companies is stepping up efforts in areas of fraud identification and prevention as part of a wider enterprise risk management strategy.

"This includes leveraging on databases and technology to more efficiently identify fraud. On the industry level, more consumer education campaigns on what constitutes insurance fraud and its negative impact will be undertaken," Rajendram said.

To effectively combat fraud in the industry, he added, a high level committee has been set up since 2005.

Included in the committee are ISM, Bank Negara Malaysia, the Anti-Corruption Agency Malaysia, the Commercial Crime Investigation Department and the respective insurance and takaful associations.

Meanwhile, ACFE president Akhbar Satar said education is key in the fight against fraud.

"Only when individuals and corporations are aware of the different fraudulent schemes in the market will they be able to defend against them. If you are not trained for fraud you will never find it," he added.

The ACFE is the world's main provider of anti-fraud training and education.

Akhbar said the ACFE agrees with the call by the Royal Malaysian Police in 2006 for specific provisions in the Penal Code to deal with the complex issue of insurance and takaful fraud.

"By defining the crime more specifically, it will assist in education law enforcement officers on insurance fraud and provide clear cut cases for prosecution of this crime. Prosecution is the most effective deterrent against insurance fraud," he said.

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Almost 80 Pct Fraud Cases Are Not Reported Every Year: ACFE

KUALA LUMPUR, Jan 14 (Bernama) -- About 80 percent of the fraud cases are not reported every year according to president of the Malaysian Chapter of the Association of Certified Fraud Examiners president (ACFE), Akhbar Satar.

"The reasons individuals and corporations do not report are because they are afraid to get involved and they themselves are involved," he said at the opening of the Insurance and Takaful Fraud Conference here today.

The conference is organised by Insurance Services Malaysia Bhd (ISM) and ACFE.

Akhbar said education would be the key in the fight against fraud.

"Only when they are aware of the different fraudulent schemes in the market will they be able to defend against them.

"If you are not trained to look for fraud, you will never find it," he said.

He said the conference was in line with the association's efforts to create a greater awareness on fraud.

"Insurance and takaful are pervasive in every aspect of business and personal life.

"Health, travel, property, cargo and vehicles are just some examples where insurance and takaful play an enabling role for customers and businesses to operate.

"There is therefore both a social and moral need for the industry to be pro-active in preventing fraud in the industry," Akhbar said.

He said many industries were reluctant to openly address the issue of fraud, resulting in lack of public knowledge on the types and dangers of fraud.

"While businesses suffer losses due to fraud, ultimately it is consumers that have to bear the burden of fraud losses through higher costs," he said.

Meanwhile, ISM chief executive officer, Carl Rajendram. said there were two general categories of insurance and takaful fraud -- soft and hard fraud.

He said the soft fraud was usually perpetuated by ordinary consumers during an insurance claim.

"The fraud includes inflating or exaggerating a genuine claim, concealing information at the time of claim and claiming for additional losses that might not be covered under the insurance or takaful contract.

He said hard fraud like staging motor accidents, arson and murder involved serious crimes and was usually committed by organised crime syndicates.

-- BERNAMA ------------------------------------------------------