RM1b lost yearly to fraud, say adjusters

KUALA LUMPUR: Fraudulent motor insurance claims account for an estimated RM1 billion in losses annually, said insurance adjusters.

Association of Malaysian Loss Adjusters (AMLA) chairman Y.K. Foo said the most prevalent fraudulent claims involved accidents, vehicle thefts, fires and staged collisions.

"While the majority of claims submitted to insurers are genuine, fraud remains a persistent issue," he said.

Foo said an adjusting firm could handle an average of 200 suspicious cases requiring formal investigation each year.

"Following thorough inquiries, approximately 40 to 50 per cent of these flagged cases are confirmed as actual, actionable fraud, with overall fraud incidence rates remaining relatively stable year on year."

He said AMLA had 41 members, nearly half of whom dealt with motor insurance fraud, while the rest handled other investigations and insurance claims.

Foo said the scams ranged from opportunistic individual policy breaches to highly organised syndicate operations.

"At the individual level, the most common tactic involves lapsed policies, in which vehicle owners who crash while uninsured quickly purchase a new policy before reporting the accident days later.

"Claims submitted within a week of renewing a long-lapsed policy are immediate red flags for investigators.

"Illegal operators sometimes pair an uninsured, damaged vehicle from a repair yard with an insured vehicle to stage a fake multi-vehicle crash and claim payouts on both.

"Another tactic involves faking or exaggerating personal injuries."

He said fraudsters previously preferred driving vehicles into monsoon drains, lakes or rivers to claim insurance, but a crackdown on those claims had prompted a shift towards vehicle arson.

"With fire, everything is destroyed and little evidence remains, apart from traces of accelerants."

He added that arson incidents had risen to around 20 cases annually per firm.

Foo also warned motorists against accident-scene touts who exploit drivers' panic to initiate fraudulent claims, with unscrupulous operators routinely towing vehicles to unapproved locations to cause secondary damage or re-impact them to inflate claim amounts.

"Everyone will be in a state of shock after an accident and may not know what to do. These unscrupulous people will tow your vehicle somewhere and probably tamper with the damage or bang the car again to inflate the claim amount."

To curb the issue in the long term, AMLA is advocating better information-sharing among insurers, adjusters, law enforcement agencies and medical institutions.

Foo added that if the entire ecosystem could develop a process through which legitimate claim information was shared quickly and securely, industry stakeholders could work together to reduce fraud and, ultimately, keep consumer premiums within a controlled percentage.