Insurance Fraud costing Insurers hundreds of Millions

Information sourced from The Star, 14 Jan 2011 and summarized below for your reading pleasure.

Fingers have been chopped off, medical ailments exaggerated and even death faked - all for the purpose of fraudulent insurance claims.

The problem is widespread and insurance companies have lost hundreds of millions of ringgit, forcing them to push up the premium rates and pass on the costs to other consumers.

Records from the Federal Police show that fraudulent claims have been increasing in the past few years with Selangor, Kuala Lumpur and Johore having the highest number of cases.

In 2007, a total of 38 cases involving RM4.1 million in losses were reported. However 2008, saw a slight drop in the number of cases with Selangor topping the states with RM1.3 million. The number of fraud cases was at its highest in 2009, with 65 cases involving RM5.9 million in losses. 2010 figures until August stood at RM 1.1 million with 50 cases reported.

Although the police put the amount involved at about RM 12million in the past 4 years, the industry estimates that bogus claims cost Insurers about RM500 million a year.

The claims come in all shapes and sizes:

Third party claims frauds are committed by reporting non existent accident where police report, hospital records, specialist reports and other documents - all contained false information.

Life/PA insurance fraud involves the use of false medical cards, forged / faked death and burial  certificates, marriage certificates, police reports and other relevant documents.

Fire claims involve mostly industrial companies. Store owners whose businesses are on the decline or those with outdated goods have been found to have set their premises ablaze.Claim is said to be higher than the actual amount lost.

The last and most common claim involves car theft. There were known cases of people who were heavily in debt, resorted to working with syndicates by reporting that their vehicles had been stolen.


A word of caution from the author:
Making a fraudulent claim is a serious offence and is punishable under the Penal Code.