Insurance fraud: Time to stop counting losses and take action

 

It was no trivial claim - RM1.2 million in damages had been awarded. The claimant alleged that while riding his motorcycle, he was struck by a car at KM57 of the Ipoh–Kuala Lumpur trunk road, leaving him paralysed in the lower limbs.

But on appeal, the Ipoh High Court reversed the decision, citing fraudulent elements. The claimant’s statement alleged a car had collided with the rear of his motorcycle, yet his medical report showed he had crashed alone on a slippery road.

The defendants - the driver and owner of the car - lodged police reports suggesting fabrication, and the judge agreed.

Had the appeal not been lodged, another RM1 million would have been added to the already staggering losses insurers face from false claims.

The General Insurance Association of Malaysia has, over the years, raised the importance of vigilance in a world where fraudsters are increasingly using advanced technology, including artificial intelligence, to deceive victims.

Last year, Sean Wang, CEO of Allianz General Insurance Company (Malaysia), estimated the industry loses about RM1 billion annually, with exaggerated or fraudulent claims accounting for roughly 10 percent of the RM10 billion total motor insurance payouts.

“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.

Yet police figures paint a different picture: over the past five years, only 97 cases of insurance fraud were recorded, amounting to RM8.57 million in losses. The most common fraud - false accident claims - accounted for just RM226,402.

Authorities often dismiss motor insurance fraud as “victimless”. This is a fallacy. Fraudulent activities affect innocent people directly, through injury, or indirectly, by raising premiums for honest consumers.

Investigating fraud drains resources from genuine claims, delaying payouts for those truly in need. Worse, staged accidents and arson put lives at risk, while fraudsters often have links to organised crime, meaning insurance fraud helps fund other serious offences.

Lessons from the UK model

So where do we go from here? Are insurers to continue petitioning Bank Negara for premium hikes while motorists resist further burdens? Why isn’t this matter taken seriously? The police may be stretched thin, but surely a dedicated unit for insurance fraud is warranted.

The United Kingdom offers a model worth emulating. Its Insurance Fraud Register, launched in 2013, is a centralised database of proven fraudsters, containing over 25,000 records.

The Insurance Fraud Bureau coordinates industry efforts, working closely with law enforcement and encouraging public reporting.

Meanwhile, the Insurance Fraud Enforcement Department (IFED) - a specialised police unit funded by insurers - has secured more than 420 convictions since 2012, recovered millions in assets, and deterred fraud through awareness campaigns.

IFED’s success has been documented in the BBC series “Claimed and Shamed”, which is available on YouTube.

A stronger stand against fraud

Malaysia cannot afford to treat insurance fraud as a peripheral issue. It is not merely a financial nuisance—it is a national scandal. Every false claim acts as a hidden tax on honest motorists and a direct assault on public trust.

For too long, insurers have treated fraud as a balance-sheet problem, while regulators have treated it as a side issue. If the industry is losing over RM1 billion every year, the time for polite appeals has passed. A coordinated defence is long overdue.

Fraudsters thrive on weak enforcement, fragmented oversight, and blurred accountability. The responsibility of insurers does not stop at collecting premiums; they must actively protect motorists from being targeted by syndicates, crooked workshops, and towing cartels.

By establishing a Malaysian Insurance Fraud Register, building industry-police collaboration, and enforcing penalties severe enough to deter offenders, Malaysia can send a clear message.

Until we stop counting losses and start building defences, premiums will keep rising, honest motorists will keep paying, and fraudsters will keep walking free. - Mkini

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R NADESWARAN, in his years as an investigative journalist, wrote extensively on insurance fraud and has never abandoned the cause, continuing his campaign, demanding not just accountability but action -- insisting that insurers’ responsibility cannot end with the collection of premiums. It must extend to protecting motorists from being defrauded, coerced, or dragged into fraudulent schemes, and to ensuring consumers are not forced to pay for the insurers’ follies. Comments: citizen.nades22@gmail.com.

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.