Fraudulent claims no more - I-Share brings some sanity to motor insurance

Discussions have been ongoing within the insurance industry for well over 20 years and this initiative will help identify and root out the ‘would be’ policyholders, who deliberately provide wrong information of their claims history to secure lower premiums as well as hopefully bring an end to those who present fraudulent claims. Many hold the expectation that over time considerable benefits will accrue not only to insurance companies but also the insurance buying public.

Insurance fraud all over the world is something that the industry has to face squarely. International statistics suggest that fraudulent claims account for between seven to 15 percent of the total payout. While we do not have any such statistics here in Trinidad and Tobago, there is the general view that the situation is quite bad as most persons do not see anything wrong in obtaining a higher claims settlement from insurance companies than they deserve as they believe that they have an entitlement and to get something extra as they have paid their premiums. However, that notion is contrary to insurance law since one must not profit but rather one must be put in the same financial position as prior to the claim.

SERIOUS FRAUD

Various jurisdictions are treating with insurance fraud in different ways — some leniently while others are taking this practice very seriously. Especially in the more developed countries, these insurance companies are required to pursue the perpetrators of insurance fraud as long as it is detected or they run the risk to being sanctioned by the Regulator or even lose their licence.

In those jurisdictions insurance fraud is seen as a serious crime against society and the wrongdoers are not allowed to benefit since there is the view that when insurance companies achieve good operating results policyholders will reap the reward through lower premiums and ultimately everyone is a winner. Conversely, when fraudsters escape unscathed insurance companies factor higher claims expense into their premiums that are ultimately passed on to consumers.

This approach is no different to financial institutions and credit providers who are able to check on the credit worthiness of their customers and are better able to make informed decisions about the track record to service their borrowings and so reduce the level of non-performing and delinquent loans. Ultimately, the better the performance of portfolios the greater is the opportunity for reduced interest spreads and therefore lower borrowing costs. It is no different in the case of the insurance industry since with lower claims costs by detecting fraudulent claims the greater will be the chance of these gains flowing to policyholders in the long run.

Bernard K Aquing
Chartered Insurer
Consultant to the Association of
Trinidad and Tobago Insurance Companies (ATTIC