Concern as insurance fraud in Uganda grows to Shs7b

Companies are losing more than Shs7 billion per year in form of insurance fraud, the Uganda Insurance Regulatory Authority (IRA) has revealed.

Speaking at a fraud investigators’ workshop in Kampala on Thursday, Protazio Sande, the Director of Research, Planning, and Market Development at IRA, said the insurance industry is registering increasing cases of fraud with the regulators, citing motor vehicle and medical insurance as the most affected.  

Sande said the most common offenses are staged vehicle theft and staged vehicle accidents and that for medical insurance, fraud is one of the reasons medical insurance is the most loss-making insurance business in Uganda.

Sande also admitted that some cases of fraud are committed by staff in collaboration with policyholders. He said that there is a policy in the industry that when an insider job of fraud is detected, the person involved is not only dismissed from work but also blacklisted by the industry.

The commonest motor vehicle fraud offenses are staged accidents and staged thefts, inflated vehicle damage, and staged car burning or destruction by fire in that order, according to IRA. It is also becoming common for fraudsters to buy comprehensive motor insurance policies for the same vehicle but with different insurance companies.

The main motive behind this is usually to stake a theft or destruction, and then they illegally claim from each of the insurers, the same amount equivalent to the cost of the vehicle. There is also a high fraud crime rate regarding Motor Third Party Insurance, which involves the falsification of supporting documents like logbooks.

The Third Part insurance crime rate was partly attributed to the obsolete law which was enacted more than 30 years ago.

Pamela Kentaro, a Legal Officer in the Directorate of Traffic and Road Safety, wondered why it has taken long to complete the amendment process for the law, adding that the little money provided to a Third Party victim is too low.  

The proposals for the amendment are currently at the cabinet level after the government introduced a new policy on legislation, requiring that every bill must be accompanied by an impact assessment report. Sande says that this has been done and submitted to the cabinet, which he hopes, will soon get the bill ready to be tabled in parliament.

He is hopeful that it answers some of the questions including the amounts payable as well as how the insurance industry can handle a hit-and-run accident victim.

Under medical insurance claims, most fraud cases involve falsifying diagnoses and painting a picture of a problem more expensive to treat. In some cases, the medical service provider bills each step in the process as a single procedure “as if it were a separate procedure,” so as to inflate the billing, while others perform services that are otherwise unnecessary, so as to gain more.

Under life insurance, the commonest type of fraud is faking death. This is done by ensuring a reasonable amount of premium for a short time period, usually about six months, then the insured is declared dead.

Kevin Walungama Kateete, Manager of Licensing and Compliance, said there is unusual connivance between the fraudster and a medical officer and police for the documentation to be completed for presentation for a claim at the insurance company.  

Insurance brokers and agents are also blamed for involving in fraudulent claims, especially creating fictitious insurance policies, which are then sold to the public, only for one to fail to secure a claim.

They have also been implicated in the failure to remit premiums from clients to the insurance company. Insurance fraud has also been discovered at workplaces under Worker’s Compensation Insurance.

According to IRA, most cases under this involve faking injuries, and forging medical documents mainly to exaggerate an injury while there are also cases where an injury happens away from work and the claimant falsely presents it as a workplace injury.

A study by auditing firm, KPMG shows that insurance fraud in Uganda adds 10 percent to the cost of each insurance premium in the industry, and is one of the reasons for the low market penetration levels in the country. The study also revealed that found that false claims had jumped 61 percent between 2018 and 2019, callings for more capacity building through training.