At one of insurance sector Chief Executive Officers’ breakfast at the Sheraton hotel, members were astounded to learn that a certain fraudster had somehow maneuvered his way around the industry and insured a tired-looking, old, Mercedes Benz with four insurance companies and had collected from all in contravention of insurance policy.” The lack of strong communication channels between insurance firms was responsible for the Benz case. Some fraudsters have become really bold nowadays,” Evelyn Nkalubo-Muwemba, the director legal and secretary to the Insurance Regulatory Authority (IRA), noted at the time. “Insurance companies have to work together to cut the number of fraudsters in the sector.”
The Insurance Regulatory Authority (IRA) released data for the complaints bureau in 2013 showing 44 complaints related to Motor Vehicle Commercial policies, which is the highest single total category contributing 37% of 118 complaints registered. Other complaints were registered in the insurance types of Goods in Transit, group personal accident, bonds, motor third party, workers compensation, burglary, retirement benefits and loan protection.
Nkalubo-Muwemba noted that 45% or 53 cases were due to breaches in insurance policy conditions, while 32 complaints were due to delays in settling claims. By the end of the year 2013, a total 104 complaints had been settled, 11 are still pending and three were settled through arbitration. She noted that the complaints bureau is set to recruit two new lawyers to bolster the bureaus capacity. Insurance fraud is varied.
Complaints in monitoring useful source of information
Most insurance companies do not have strong investigative departments, creating a hole that can be exploited by fraudsters that can lie at policy formulation stage.
Unfair delays in claim payments
Insurance companies take too long to settle insurance clients, most times this discourages repeat business. Some insurance firms go to the extent of hiring lawyers and requesting unnecessary documentation to slow settlement of claims.” There is a general laxity in departments concerned with claims settlement,” Muwemba said at the meeting.
Fraud and exaggerated insurance claims
Clients sometimes file insurance claims that are way above what is fair, causing delays in compensation.
Malpractice in police reporting
Police officers are sometimes bribed to write reports that offer large unfair compensation to clients. In other instances, the reports are delayed. “There are cases when a vehicle has a simple dent and the police write a report recommending a brand new car for the client. The proper thing would be to request for simple repairs,” Muwemba noted.
Policies submitted for approval differing from those issued to the customers; all insurance policies in the market must first be approved by the IRA. Unfortunately, some companies change policies and go on to sell these policies without seeking the IRA’s approval.
Poor communication with clients even in instances where claims are not payable; insurance companies are meant to tell clients directly when certain claims will not be paid with specific reasons.” Insurance companies should set up desks with friendly officers to educate their clients,” Muwemba highlighted further.
Cases of biased reporting by loss assessors and/or investigators’ reports
Loss assessors find themselves between a rock and a hard place. They sometimes skew reports to favour insurance companies by recommending tiny compensation. Other times they try to please clients by recommending massive compensation. Some insurance companies do not pay full claims.
Failure to inform the policyholder of the kind/type of cover and its rights under the policy
Insurance companies continue to collect premiums from clients even after they have breached policy conditions. When the risk occurs they do settle the client. “We shall compel such insurance companies that do not inform the client in time to settle the client in full,” Kaddunabi Lubega, the IRA boss, says.
On the way forward, IRA has announced plans to upgrade human capacity of the Complainants Bureau by recruiting two lawyers. The process is already ongoing. Other measures she recommends are:
Fast-tracking finalization and enactment of the Insurance Appeals Tribunal Regulations.
Collaborating with police to investigate and combat fraud. Encouraging players to report and exchange information on fraudulent claims. The players should sort out their differences without hurting their clients. (Treatment of treat subrogation cases.) Players putting guidelines in place; e.g., would they call for letters of administration in cases of motor third party? Prompt response from players would greatly reduce on the number of communications required to dispose off a claim.
Players should not begin underwriting at claims time. Players should be cognizant of the fact that issue policy creates obligations to pay claims regardless of whether premiums are paid or not