Chronicle Editor
Michael Magoronga, Midlands Correspondent
Gift Fungai Gumbo (32) and Taboka Maphosa (32) recently made headlines when they teamed up and stage-managed an accident in an attempt to defraud a local insurance company of about US$80 000.
The two friends stage-managed a road traffic accident involving a BMW vehicle and a Jeep Cherokee in Bulawayo before they went on to lodge a claim of US$80 000 with Old Mutual purporting that the BMW which was being driven by Maphosa had been rendered a write-off.
Smelling a rat, Old Mutual, however, engaged an external assessor for further assessment which unearthed that this was a scam and the two were actually long-time friends who had connived to defraud the company.
They were arrested and arraigned before Bulawayo magistrate Mrs Bonginkosi Mnkandla who remanded them out of custody.
Their case is still before the courts.
The incident brings to the fore the worryingly increasing cases of insurance fraud that are threatening to reverse the gains of the short-term insurance sector and to a certain extent the life and funeral insurance sectors.
Had they succeeded, the duo could have defrauded the sector of a handsome sum of money.
Besides crippling the insurance sector, such criminal cases have serious negative economic consequences as they result in lack of liquidity in the economy considering that 40 percent of national cash needs are financed by insurance premiums.
Insurance fraud in Zimbabwe is coming in the form of inflating claims, making multiple claims or stage managing disasters.
According to the International Association of Insurance Supervisors (IAIS), it is estimated that 30 percent of global insurance claims are fraudulent.
Insurance Council of Zimbabwe (ICZ) Marketing and Public Relations Manager, Ms Ringisayi Batiya said such cases were rampant especially within the short-term insurance sector.
“Several insurance fraud cases have been identified and are under investigation by the short-term insurance industry through its Zimbabwe Insurance Crimes Bureau. It is estimated that 30 percent of all claims submitted are fraudulent as a world trend. The cases under investigation so far are of a fraudulent nature. The investigation is yet to reveal if money laundering is involved,” said Ms Batiya.
She said the recently introduced Zimbabwe Insurance Crimes Bureau (ZICB) was making significant strides in bringing sanity in the insurance sector.
In July this year, the ICZ introduced the ZICB amid an increase in insurance fraud cases and has already made milestones in the insurance industry’s fight against such cases.
“The ZICB operations have made positive strides in the short-term insurance industry. For the year 2023, the Bureau has brought a number of cases before the courts with some in the trial stages. The Bureau has also identified and successfully busted three syndicates whose leaders are before the courts. The investigations being conducted by the ZICB and the publication of the court cases are believed to be working as deterrents to would-be fraudsters,” she said.
A lot of other measures are also being pursued to curb the scourge.
“To detect fraudulent insurance claims, the Crimes Bureau has put in use an operating system with an artificial intelligence (AI) function which applies extensive analytics to the data to bring out trends and patterns that may be missed by the human eye. All short-term insurance claims are reviewed through this system. The introduction of an industry whistleblowing facility which will be officially launched in due course is another mechanism. We are urging members of the public to report insurance fraud and other related crimes affecting the insurance sector,” said Ms Batiya.
The training of journalists in covering and raising awareness of insurance coverage has also helped to address such issues.
“Insurers are issuing warning messages to policyholders, complemented by ICZ’s educational and awareness initiatives aimed at providing information on the effects of fraud to policyholders. The increase in coverage of insurance fraud crimes by the media is increasing the perception that fraudsters will be caught and punished thereby deterring would-be perpetrators,” she said.
Insurance and Pensions Commission (Ipec) commissioner, Dr Grace Muradzikwa said the ZICB was introduced to combat insurance fraud within the sector adding that more can be gained by the industry through collaboration instead of competition.
“Under the Insurance Core Principles for regulators ICP 21, the regulators should ensure that insurers and intermediaries take effective measures to deter, prevent, detect, report and remedy fraud in insurance. The regulator (Ipec) should have a thorough and comprehensive understanding of the types of fraud risk to which insurers and intermediaries are exposed. The regulator should also regularly assess the potential fraud risks to the insurance sector and require insurers and intermediaries to take effective measures to address those risks,” she said.
Dr Muradzikwa also highlighted the impact of insurance fraud on the economy.
“Insurance fraud not only impacts the insurance industry but also has far-reaching consequences for consumers and the economy. Some of the negative consequences of insurance fraud include driving premiums up, eating into resources that could have been channelled towards legitimate claims; and eroding trust in the insurance industry. For this reason, fighting this scourge is more critical than ever if premiums are to be affordable to consumers, resources always available for the settlement of legitimate claims and confidence to be instilled in the insurance industry,” said Dr Muradzikwa.
To ensure that the fight against fraudsters and would-be fraudsters is a success, it is important for the insurance industry to utilise the services of ZICB central repository to eliminate or minimise the incidences of opportunistic or syndicate fraudulent activities.
“I understand that the Bureau’s central repository will have databases of all participating entities merged into one so that the data may be shared, analysed and updated throughout the industry. Having all that information under one roof allows for fraudulent activities to be identified, especially, multiple insurance claims,” she said.
Fraudsters never tire, they devise new methods and hence the need to be ahead of them, she said.
“It would be naïve of us to expect fraudsters to succumb because we introduced the ZICB. Instead, they are probably equally busy trying to find ways to circumvent the systems that are being put in place through the Bureau. Therefore, it is critical to ensure the Bureau is well-equipped with the necessary expertise and resources to investigate, detect, and prosecute those who engage in fraudulent activities. With the advent of technological advancements, both fraudsters and those who fight fraud use it in their endeavours. To this end, it is important that the Bureau leverages technology to stay one step ahead of ever-evolving fraudulent tactics,” she said.
According to the Ipec Second quarter report, the combined ratio for short-term insurers was 88,3 percent with a claims ratio of 41,3 percent.
If one excludes 30 percent of the claims and account that to fraud, the combined ratio will improve to 75,91 percent effectively improving the soundness of the insurance sector.
The report also encourages entities to subject higher risk customers to more intensive (enhanced) due diligence measures and monitor their subsequent transactions with greater sensitivity.
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