Having concluded the year with Shs566.4b in gross written premium, the insurance industry is planning to establish an anti-fraud unit at Insurance Regulatory Authority (IRA) to crack down on the rising cases of fraud within the sector.
Speaking at the end of year Chief Executive Officers’ (CEOs) breakfast meeting yesterday in Kampala, IRA CEO Ibrahim Kaddunabbi Lubega said the sector is getting increased cases of fraud given its recent growth.
“Insurance is now coming up and the fraudsters are thinking of attacking the sector,” he said.
“We have worked with the Insurance Association and the Uganda Police to ensure that we establish an insurance fraud unit at the authority with capacity to detect and investigate cases of insurance fraud.”
The common forms of fraud are forged insurance policies and fake claims.
“We have seen instances where some people forge insurance policies and they go and dupe people, get premiums from them that they have been covered when they are not,” Mr Kaddunabbi explained.
He added: “We have instances where people come to insure but have stage-managed accidents in order to beat the requirements and get money fraudulently,”
For motor third party insurance, people are forging motor third party stickers which they use to go through the traffic system seamlessly.
IRA is now accelerating plans to adopt an online motor third party platform and amending the Motor Third Party Act to address the emerging fraud.
The regulator has also alerted insurance players to do proper underwriting for speedy claim settlement.
In 2015, audit firm KPMG released a report, East Africa Insurance Risk Fraud Survey, indicating that the sector has huge potential opportunities but the region is currently characterised by low levels of penetration due to corruption majorly escalated by insurance brokers.
“Due to inadequate risk management and governance, organisations are suffering from fraud,” Mr David Leahy, head of financial risk management KPMG East Africa, said adding, “Policyholders are innocent victims of rising insurance premiums mainly caused by fraudulent claims.”
The survey revealed that the total claims detected in Uganda were valued at Shs36m and it was considered that the total cost of claims fraud was at Shs1.8b.
The survey indicated that Uganda detected less policy fraud than Tanzania and less claims fraud than both Kenya and Tanzania.
Uganda also had the lowest scores for estimated percentage of policies and claims that are fraudulent and how much fraud adds to the premium.
It is thought that there is less fraud in Uganda but also there could be a lot more undetected fraud in policy and claims, according to the survey.
During the event, Mr Kaddunabbi also said health management organisations (HMOs) have registered a Shs4b loss as of the end of the third quarter yet their management expense ratio was lowest.
“What constitutes much of their expense is claim ratio and they had claim ratio of about 95 per cent which means from the premiums they underwrote, 95 per cent of it was paid back because they treat people,” he explained.
Mr Kaddunabbi insists the performance of HMOs will improve once government operationalises the national health insurance scheme.