Fraudulent claims increase: IPEC

THE Insurance and Pensions Commission (IPEC) said between 25 – 30 percent of claims being submitted by clients were fraudulent.

IPEC commissioner, Gace Muradzikwa

IPEC commissioner, Gace Muradzikwa this week said the regulator was worried about the increase in the number of fraudulent claims in the insurance and pension sector.

“The harsh economic environment has resulted in an increase in insurance fraud. You find out that between 25 and 30 percent of claims that are being processed are fraudulent owing to the harsh economic environment,” she said during a virtual insurance and pensions mentorship programme.

This means the sector is losing millions of dollars due to such practises.

Players in the insurance sector told The Financial Gazette that common fraudulent claims consisted mainly of motor insurance, fake death certificates to claim money and medical insurance where a family uses a single medical aid card.
“This was indicative of criminal behaviours related to the harsh macro-economic environment, which was being further compounded by Covid-19 shocks as IPEC was moving in to ensure that players in the insurance sector understand their clients as well as monitor certain trends,” she said.

Claims fraud is a violation of trust that, in general, refers to an act committed to secure personal of financial advantage.

“We are urging players in the sector to quickly report such cases to police so that they can be quickly investigated and such culprits prosecuted. In the same vein we are also encouraging players to understand their clients and identify certain trends within the insurance industry,” she said.

This comes as local companies have failed to remit at least $887 million in employee pension contributions to pension funds for the first six months of the year, according to IPEC.

Muradzikwa said there are also more than 153 000 pensioners who have not claimed their benefits from the insurance companies and the unclaimed benefits have accumulated to $196 million.

“Some of the challenges that the pensions and insurance sector are facing are that companies have not been able to remit pension funds. There are contribution arrears of $887 million. The pension fund has also been affected by reduced disposable income owing to company closures, retrenchments and lack of formal employment opportunities.

There are also unclaimed Benefits. There are at least 153,000 members with unclaimed Benefits that have accumulated to about $196 million.

The challenges that the pensions sector  are poor investment climate and low confidence owing to hyperinflationary legacy issues,” she said.

Muradzikwa said the pensions sector has witnessed a nominal increase in asset base between January and June this year as compared to the same period last year.

“The pensions sector had growth in asset base after recording an increase of 843 percent from June 2019 to June 2020, which is above the June annual inflation rate of 732 percent,” she said.