The insurance industry says over K10 billion might have gone down the drain in 2020 and 2021 due to fake insurance claims.
Insurance Association of Malawi president Abdul Majeed Dyton claimed in a written response that although an official assessment report for that period is not yet out, the situation seems to have deteriorated.
In 2019 alone, the industry lost K5 billion due to fake insurance claims.
A Reserve Bank of Malawi (RBM) annual report released on July 7 2021 seems to confirm liquidity challenges in the insurance industry.
RBM report claims tight liquidity persisted with the insurance sector registering a liquidity ratio below the recommended benchmark.
The central bank reported that the sector registered an increase in the number of brokers and agents where income gross premiums written grew by 9.2 percent to K59.8 billion in 2020 due to high growth in non-motor insurance classes of business.
The report says the motor insurance business registered a modest 5.3 percent growth to K32.8 billion in 2020, but remained the biggest class contributing 54.5 percent of total gross premiums written by the sector.
In a draft report, Insurance Association of Malawi attributes its liquidity challenges to an entrenched syndicate.
The association claims the syndicate involves some insurance employees, police officers, medical personnel, legal practitioners and court officials.
But the Malawi Law Society (MLS) and Malawi Police Service (MPS) told the association to file a formal complaint against their officers involved in fraud.
In response, Dyton claimed individual insurance companies have for years been submitting complaints to MLS, MPS and the Medical Council of Malawi on insurance fraud.
“We are, however, consolidating all matters that have not yet been addressed so that we can collectively resubmit them as an industry,” he said.
Dyton, however, applauded the bodies for showing interest to curb the malpractice.
He said: “On our part, we have either suspended or dismissed employees involved in fraud and others were arrested.
“We encourage ourselves to obtain references from each other to ensure that we are not employing people who are connected to fraudulent activities elsewhere.”
On judicial officers involved in insurance fraud, Dyton said his association met three former chief justices, but they are yet to meet the current one Rizine Mzikamanda.
In its draft report, the association says lawyers continue making unjustifiable claims.
The report also claims that some public officers issue fake police and medical reports.
A claims manager, who opted for anonymity, said although the industry has
not concluded its 2020 and 2021 assessments, K10 billion could have gone down the drain since fraud has worsened in the recent past.
“In 2019, we lost about K5 billion. Even if all factors remained equal, our loss cannot be less than K10 billion,” he argued.
He agreed with Dyton that the syndicate is complex as it involves insurance employees, police officer, lawyers and medical practitioners.
But MLS president Patrick Mpaka said his body was yet to receive a formal complaint from the Insurance Association of Malawi, with names of legal officers involved.
He said: “We are supposed to represent clients, even those making claims against insurance firms, but if indeed there are some of our members taking cases they know are based on fake police and medical reports, that would be unfortunate.”
Deputy national police spokesperson Harry Namwaza also claimed that MPS has not received any formal complaint from the association.
He said: “Let them lodge a complaint and even provide us with names, otherwise just making allegations would not help in any way. It is just like any other corruption allegation; we expect an official complaint and where possible, even names.”
The Insurance Association of Malawi in January 2021 disclosed that fake insurance claims relating to road accidents and injury claims in manufacturing industries cost them K5 billion in 2019 alone.
The association’s president then Bywell Chiwoni told Nation On Sunday that the scheme was complicated as it involved a wide range of players, including their own officers.
Chiwoni had said initially, the scheme focused on road accidents, but it had now moved to manufacturing industries where some agents are planted to take up recorded personal injuries to some lawyers who file the cases to court, sometimes without the knowledge and instructions of those injured.
Chiwoni had said the insurance industry, having gone through the claims’ files, also discovered that even police officers were involved as fake police reports were being issued to facilitate the claims.