Motor insurance fraud on the rise [WATCH]

KUALA LUMPUR: Motor insurance fraud cases have surged dramatically over the past three years, driven by evolving syndicate tactics, opportunistic financial schemes and the misuse of digital image manipulation tools to exploit claims processes.

General Insurance Association of Malaysia (PIAM) chief executive officer Chua Kim Soon said the motor insurance industry was operating at a loss as total premiums collected fall short of insurance costs.

He said fraudulent activity had worsened the financial losses of 19 general insurers who are members of PIAM, which recorded an underwriting loss of RM289.3 million last year.

"As many as 10 per cent of all motor insurance claims filed with Malaysian insurers are potentially fraudulent or manipulated, resulting in financial losses of hundreds of millions of ringgit," he said.

"This leakage directly harms honest policyholders as insurance companies are ultimately forced to adjust overall premium rates to absorb the deficit."

He added that 924 fraudulent cases were reported last year, up from 425 in 2024 and 68 in 2023.

[[nid:1547090]]

"This means that total claims payouts and operational expenditure have consistently exceeded total premiums collected."

He said fraudulent scenarios ranged from opportunistic acts by individual vehicle owners, such as exaggerating repair damage or swapping driver identities, to highly sophisticated organised criminal schemes involving staged multi-vehicle collisions and fake total-loss payouts.

Chua added that insurers were also increasingly dealing with cases involving unauthorised or unlicensed drivers, private vehicles being illegally used for commercial hire and driving under the influence.

"While insurance companies have the legal right to reject such claims under standard policy exclusions, cases involving policyholders who file false police reports to conceal the true circumstances of an incident are classified as criminal fraud. Such acts may constitute cheating and criminal breach of trust under Malaysian law."

He said industry data also highlighted disparities in claims behaviour between Peninsular Malaysia and Sabah and Sarawak.

"Peninsular Malaysia recorded a significantly higher claim frequency of 5.1 per cent, compared with 1.7 per cent in Sabah and Sarawak.

"But motor claims in Sabah and Sarawak can run substantially higher, averaging RM12,000. Accidents occur less frequently but result in costlier own-damage claims."

He said repair costs were becoming more expensive, particularly for imported spare parts used in foreign and high-end vehicle models, with motor repair costs recording a compound annual growth rate of 7.9 per cent between 2021 and 2025.

On court awards, Chua said average personal injury compensation had trended upward.

Historically, he said, major bodily injury awards were about RM600,000, but they now frequently exceed RM1 million, while extreme cases could reach RM8 million.

Chua said insurers cross-check through the Fraud Intelligence System alongside investigations by loss adjusters to combat fraud.

"Claims could also be cross-referenced using engine and chassis numbers and weather data. Cases involving suspected criminal syndicates are escalated to the police."

The New Straits Times has reached out to the police for their input.