Tougher penalties needed to curb RM1bil losses to insurance fraud
PETALING JAYA : An insurance firm is urging the authorities to enforce tougher penalties on the perpetrators of motor insurance fraud to curb the massive losses suffered by the industry.
Sean Wang, CEO of Allianz Malaysia Bhd, said that while insurance fraud is indirectly addressed through laws targeting fraud and misconduct, these measures are inadequate in dealing with the modus operandi of rogue tow truck providers and workshops.
Sean Wang.
'The industry is losing about RM1 billion every year. The annual total claim sum in the (motor insurance) industry is roughly RM10 billion, and I estimate the leakage and exaggerated claim rates at about 10% of the total sum.
'We urge the government to introduce clearer, stricter regulations and enforcement measures specifically targeting these service providers.
'This can include enhancing industry oversight, establishing severe penalties for offenders, and promoting greater transparency in the towing and service sectors,' Wang told FMT in an interview.
Modus operandi, false affiliations
Wang said the fraudulent claims are the work of a network of touts, tow truck operators, and service workshops that thrive on inflating insurance claims by 15% to 20%.
He said that these touts typically patrol urban areas on motorcycles, scouting for road accidents. Once alerted to potential 'assets', they quickly arrive at the scene to persuade drivers to use the services of particular tow trucks and workshops.
The touts would also falsely claim themselves to be affiliated with insurance companies or offer seemingly convenient solutions to convince the victims to surrender their vehicles to them.
Once the tout takes possession of the damaged vehicles, they will negotiate with workshops who are willing to inflate repair costs, sometimes using substandard parts or performing unnecessary repairs to exaggerate the claim amount.
'As a result, insurance companies suffered financially,' he said,
Wang said these touts and tow truck operators tend not to send a car immediately for repair.
'Neither will the insurance company be informed (by the touts) about the vehicles being kept by them—sometimes for days and weeks—because they want to get the best deal out of it.
'The policy holders will think that the insurance company is attending to the repairs because the person who towed it would claim to be representing us,' he said, adding that such malpractice has been existing for the last four decades.
Combatting fraudulent claims
Wang said that Bank Negara Malaysia, the main regulator of the insurance industry, has initiated several measures to combat these fraudulent practices and protect the interests of policy holders.
A crucial step has been in mandating that each insurer provide its own towing service and a means for the client to contact them directly in the event of an accident.
Insurance companies can decide whether to invest in their own fleet of tow trucks or engage third party providers, he said.
'The insurance companies and the regulator are also looking into the possibility of creating e-police reporting. This is one way to eliminate one of the pain points of our clients, as making a police report is also part of a tout's services,' he added.
Wang said Allianz has set up the Allianz Road Rangers, which operates over 300 tow trucks across the country that are always on standby for any emergency.
The firm has also enhanced its claims management and blacklisted workshops and tow truck operators known for their unethical and fraudulent activities.
Wang said insurance companies must educate policyholders and disseminate the right information to reduce fraud claims.
'For the public out there, the first thing to do during an accident is to contact your own insurance company. Once you contact the insurers, they will immediately be able to deploy their tow trucks to the site.
'I know it's easier said than done because an accident can be a very traumatising experience. But remember, whatever you sign on the spot may relinquish your rights later on,' he said.
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