Technology to curb insurance fraud

Nov 14, 2019

Many Ugandans are yet to appreciate insurance. Samson Kasumba, a pastor said that outside the basic mandatory motor third party insurance, he has not purchased additional insurance.

It had not always been easy for her to save, until Christine Kasemiire, a young businesswoman purchased a five-year life insurance policy. She said that she invests about sh50,000 every month and the 20% return on investment makes it worthwhile. 
 
"I am not good at saving but since the money is fixed, I will get my money after five years which I think is good for me since I am young and have no family yet. When I get a family I will have a plan and I am assuming it will be a lot of money then," Kasemiire said. 
 
Ricky Rapa Thomson, the co-founder, and director of Safeboda, a motorcycle taxi hire application said that insurance has transformed his business. A traffic police report shows that 7,000 people were killed in boda-boda accidents within a two year period from 2015 to 2017 in Uganda.  
 
That is almost 10 people every day. Thomson said that although his drivers are trained, they sometimes get into minor accidents and insurance compensates and helps them to recover.  
 
He said that most packages in the industry are expensive but the firm managed to get a package where they pay sh20,000 every month for insurance and they get cover worth sh2m in a month.  
 
"This is very critical because when drivers get accidents, they do not work. Yet they have to support their families and settle hospital bills. So insurance reduces this burden," he explained.  
 
"Insurance gives you that peace of mind and allows you to transfer your burden. It allows you to focus on other things that are important to your life," he said. Despite this, insurance coverage is still low in Uganda at about 0.6% of Uganda's Gross Domestic Product (GDP).  
 
Many Ugandans are yet to appreciate insurance. Samson Kasumba, a pastor said that outside the basic mandatory motor third party insurance, he has not purchased additional insurance. He said that despite the high likelihood of an accident in Kampala's busy streets, he finds comprehensive expensive.  

 Alhaj Ibrahim Kaddunabi Lubega, the Chief Executive Officer Insurance Regulatory Authority speaking during the CEO breakfast meeting. PHOTO: Shamim Saad

 "I wonder how many people make those claims, you know. It doesn't help that insurance companies get away with not paying people. People have the perception that insurance is wasting money, even when you pay, you will have to call God and Muhammad and everybody to get your money back," Kasumba said. 
 
A claim is an application by the insured for compensation over a loss or damage and Kasumba is not entirely wrong about the claims settlement process. In 2018, the Insurance Regulatory Authority (IRA) registered a total of 102 cases that were reported across all segments, with 34 involving forgery and issuing of fake policies, 32 motor-related, 12 were third-party claims and 24 cases in respect to non-remittance of cash premiums by insurance agents. 
 
A study conducted by KPMG, an audit firm in 2015 showed that in Uganda, fraud adds 10% to the cost of each insurance premium in the industry. The report also shows that fraud has contributed to the limited insurance penetration levels in the country. 
 
The study found that fake insurance claims jumped 61% to sh4.9b in 2019 from sh3b the year before. The report showed that the situation calls for more capacity building through training in claims handling.   
 
Bayo Folayan, Chief Executive Officer (CEO) of the National Insurance Company holding company noted that the no insurance company goes into business to settle claims late, but that the scrutiny is warranted to weed out fictitious claims that threaten the industry.  
 
He said that once the claims are known to be genuine, the insurance company will pay in record time.  
 
"Just like banks, we have people come to defraud, it is part of the business. The fraudulent claims industry is running into billions. This impacts on the efficiency and effectiveness of an insurance company because you can be running your business at a loss," Folayan explained.  
 
Fraud has added to disputes between insurance companies and policyholders that happen because of disagreements about coverage, claim evaluation, and settlement. Fraud has also crept into the medical insurance business, and this has led to the cancelation of business between Uganda's top insurer - Jubilee and 23 hospitals. 
 
In a letter dated November 1, Jubilee Insurance said the termination of service providers from its panel is largely based on non-compliance and was done to ensure that insurance customers were "not robbed" in the manner the affected facilities had been doing.  
 
Hitherto, the IRA's 2018 report showed that medical insurance uptake had been on the rise and was one of the largest classes of business by corporate institutions. Medical insurance uptake grew by 26.96% to sh204.05b in 2018. 
 
The 2018 industry performance report released this year indicates life insurance business registered a 28.6% surge to sh216b. On the other hand non-Life insurance business gross written premiums grew by 12.3% to sh570b in 2018.  
 
Ibrahim Lubega Kaddunabbi, the IRA chief executive officer said fraud in insurance is a growing risk for many insurance businesses. He made the remarks while presenting his paper at the 44th chief executive officer break conference in Kampala.   
 
He explained that fraud cases have made it difficult for people to appreciate insurance. "Break the fraud triangle by eliminating opportunities through education and awareness," he instructed the sector CEOs.  
 
Allan Mafabi, the Britam Insurance Chief Executive Officer said that fraud is difficult to weed out because it is perpetuated by organised crime syndicates. "Fraudsters plan everything before they attack. People even die in manufactured accidents," he revealed.  
 
Technology to fight fraud, expand sector coverage 
 
In order to fight the surge in fraud, Kaddunabbi urged the industry CEOs to carry out hacking tests and to improve cyber security and quality assurance systems. He revealed that some hackers were hacking into systems and creating valid medical smart cards.  
 
Paul Kavuma, the Chief Executive Officer of the Uganda Insurers Association (UIA) said that despite improvements in claims settlements, the industry has a lot of room for improvement and the use of technology is one major tool for improvement.  
 
"There are attempts to innovate for self-claim settlement where clients with say large fleets of vehicles self-regulate their claims processes," he said.   
 
He explained that the industry is setting up a platform called Hope For Accident Victims of Road Accidents (HOVITA) to improve claims settlements, especially for motor third party insurance.   
 
Folayan noted that although the insurance sector is still grappling with low insurance penetration, Ugandans are starting to acknowledge that they need to insure their assets.  
 
"Insurance is one of the drivers of development in the country. When the banks want to lend they need insurance firms to cover the risk associated with lending," Folayan said. 
 
Soul Seremba, the Insurance Institute of Uganda (IIU) Chief Executive Officer said that mobile-enabled micro insurance innovations are the new trend in Uganda. He explained that while the initial focus was on the top end of the market, most Ugandans can only afford microinsurance products. 
 
"Mobile enabled micro insurance is now a reality and we must embrace it," he said.  
 

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