Insurance firms cry foul over rising fraud

A car that was involved in a road accident is towed from the scene in Kigali. Rwandan and Ugandan insurers are worried about fraud due to weak detection systems in the value chain. PHOTO | FILE 

By Kabona Esiara

In Summary

• Rwandan and Ugandan insurers are worried about fraud due to weak detection systems in the value chain. But Kenyan and Tanzania insurers deem fraud a small challenge, according to the KPMG Next Generation Customer for East Africa Survey report launched in Kigali recently.
• Medical insurance, fire and vehicle management companies are the most affected by inflated claims.
• The fraud, according to experts, is adding an extra 18 per cent extra premium as the insurers seek to recover their losses.

Rwandan and Ugandan insurers are worried about fraud due to weak detection systems in the value chain. But Kenyan and Tanzania insurers deem fraud a small challenge, according to the KPMG Next Generation Customer for East Africa Survey report launched in Kigali recently.

The survey shows that 12.5 per cent of Rwandan insurers, agents and brokers worry about fraud, closely followed by Uganda with 12 per cent, Kenya with 5 per cent and Tanzania with 4 per cent.

Though the survey does not give the reasons why Kenyan and Tanzanian insurers perceive insurance fraud as a lesser challenge, earlier studies by KPMG indicate the crime continues undetected.

Medical insurance, fire and vehicle management companies are the most affected by inflated claims.

“When a house is burnt down, in most cases the victims include items they have never owned in life. There are also cases when they exaggerate the cost at which the building was constructed,” said Esdras Ndkundumukiza, commercial director of Soras Assurances Generales.

Medical insurance providers are also grappling with inflated bills from hospitals and clinics as policy holders collude with health services providers to inflate costs.

“We do not have any concerns with pharmacies, as we have agreed on the prices of drugs. However, hospitals and clinics exaggerate their bills,” said a UAP Rwandan employee.

In Rwanda, before the regulator of the industry stepped in to set minimal motor vehicle premiums, the industry was grappling with price undercutting.

“If fraud remains unchecked it will continue to cause policyholders to suffer via increased payments and diversion of resources, time and efforts away from fast and fair settlement of genuine claims,” said James Norman, associate director of insurance at KPMG East Africa.

The fraud, according to experts, is adding an extra 18 per cent extra premium as the insurers seek to recover their losses.