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ABSTRACT
The research examined management of fraud in Nigeria insurance companies benefit and challenges. (A survey of selected insurance in port harcourt). The researcher having successfully indicated the numerous problems obtained on management of fraud in Nigeria insurance companies benefit and challenges will now state the objectives of this research which is on detection and check of claims fraud as a catalyst to growth in the insurance industry and the purpose of carrying research work. To access the meaning of fraud. To know the importance of fraud. To identify various types of insurance fraud. What are the challenges of fraud in the insurance industry. Determination of control measure and strategies against fraud and making of vital recommendation. This research has passed through stages and has recommended that there should be solutions to the problems of over generosity of the insurer towards risk underwriting increase the tendency of claim. Insurers should not be strict toward risk assessment and force the company out of business there should be solutions to the fraudulent claim payment often which often affect the profit maximization of insurance business. They should undergo training on the humanitarian aspect of their job. Commission could be earned without being hawks, and they responsible for their client’s welfare, posses good knowledge of service obtained in the market and most importantly provide effective claims follow-up services. Booth, (1999). The -importance of education and enlightenment in any society cannot be overemphasized. The need for education exist both for the insured and the insurer as the this will close communication gap. The rule should be “know what you are buying for the insured; and for the insurer” “explain in detail what you are selling”. Seminars, conferences and other media exchange will help improve the situation Cummins (1996).
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Fraud is also as defecation. It means the act of making some entries in other to misappropriation some goods or money, such approach may be performed by an individual or group of individual without the knowledge of the management committee with the intention of defrauding the insurance company (Artis, 2002). In general, the insurance claim is filed with a local representative of the specific details of the insurance claim and negotiating the payment from the main insurers. Goford, (1985), many times a recognize authority (Doctor repairs shops, building contractors) can file the necessary insurance claim forms directly with the insurance company (Duffield, 2001). However, sometimes the policy holder may not want to file an actual insurance claim if the damage is minor or another party has agreed to pay out-of- pocket for their mistake. (Berlin, 1991). It can be cursed when claim fraud is detected from fictitious payment in the cash book or stock record, in the case of goods. It has increased in size and used in obtaining great sophistication by the day.
In a bid to reduce the occurrence and size of fraud in Nigeria insurance company. The insurance workers now take adequate measures before setting or indemnifying a claim, these measures bring into causes of delay in claim settlement (Baldock 1997). The reason for this researcher work is to identify the study of the detection and checks of claims fraud in insurance companies. Nigeria has recommended more important or vital measures that will help in the controlling of frauds in insurance company.
An insurance claim is the actual application for benefits provided by an insurance company. Policy holders must first file an insurance claim before any money can be disbursed to the hospital or repair shop or other contracted service. The insurance company may or may not approve the claim, based on their own assessment of the circumstances, depending on the nature of the claim. Theft claim incidents are first reported to the nearest policy station in which a police report must be given to effect the commencement of investigation Cinldini.
A defining characteristic of insurance is that the product is sold and paid for long before it is delivered. For a certain payment now, the buyer of insurance gets the insurance company’s promise to deliver money and services in the future should an uncertain event occur. (Renshaw, |1994). Derrig (2002) defines insurance fraud as a criminal act, provable beyond reasonable doubt that violates statutes, making the willful act of obtaining money or value from a insurer under false pretences or material misrepresentations a crime (Cited in Derring and Krauss, 1994). According to Hoyt (2006) “Fraud increases the cost of insurers, threatens the financial strength of insurers and negatively affects the availability of insurance”.
Generally, fraud takes it roots from the human heart. It is axiom that the heart is deceitful above all things and is desperately wicked. Fraud is the number one enemy of the business world, no company is immune to it and it is in all works of life (Goford 1985).
1.2 STATEMENT OF THE PROBLEM
Most insurance companies do not have qualified manpower that will effectively claim department independent adjusters, assessors, engineers are used on loss investigation especially where fraud is suspected. Unfortunately there is a great dearth of qualified personnel in this arm of the industry. Owning to this limited expertise, delays are often encountered in submission of reports on large losses. The level of insurance literacy in our country is considerably low. The insuring public hardly understands the legal nature of insurance as different from other business. The policy itself is a clear evidence of the contract of insurance and one will expect any serious minded person going into such deal to read and understand the terms and conditions of the policy. The policy forms the base of the contract and remains a valid thing tenable in the court since it is assumed to represent the minds of the parties involved. (Lawless, 1984).
The challenges of fraud in Nigeria insurance companies: Of high-level fraud can affect an organization in a number of ways:
1. Financial: The main impact is the loss of funds or equipment that occurs from the fraud. The share price may also be affected adversely if the fraud is of sufficient level or indicative of weak internal controls.
2. Reputation Management: The impact of fraud may affect the ability of the organization to deliver on future contract.
3. Employee Morale: Internal trust of existing employee maybe damaged, especially if concerns have not been sufficiently followed up in the past. Future recruitment and retention of staff may be an issue dependently upon the size of fraud, or if action is not taken following the discovery of fraud.
The Fraudster: – An individual found to be commuting fraud is likely to suffer a range of impacts, from economic loss by the repaying of monies taken or the payment of times to the loss of personal and professional integrity, possibly limiting future career options and earning capacity.
The unfortunate situation is that most insured hardly take time to read and comprehend the terms of the contract. When claims arise and these limitations are pointed out to them, they are often disappointed and may refuse to comply with other provision of the policy.
1.3 OBJECTIVES AND PURPOSE OF THE STUDY
The researcher having successful indicated the numerous problems obtained on management of fraud in Nigeria insurance company, benefit and challenges will now state the objective of this research work.
1) To assess the meaning of fraud
2) To identify various types of fraud
3) To know how fraud is managed in the Nigeria insurance companies.
4) To know the benefit in the management of fraud in the insurance industry.
5) To identify the challenges of fraud in the insurance industry.
6) To proffer solutions to the challenges of fraud in the insurance industry.
1.4 RESEARCH HYPOTHESES
The following are the research hypothesis:
H1: There are no benefits in the management of fraud in the insurance industry.
H2: There are no significant challenges in the management of fraud in the insurance industry.
1.5 SIGNIFICANCE OF THE STUDY
This research is on the management of fraud in Nigeria insurance companies benefit and challenges. This research project will be beneficial to the insurance companies, the underwriters, the insured, the government, people in the society who have the quest for more knowledge on how to ascertain management of fraud in Nigeria insurance companies. Finally, this study will be of a good help to the students of insurance department of Rivers State Polytechnic and other Higher Institution of learning on management of fraud in Nigeria insurance companies, benefit and challenges.
1.6 SCOPE OF THE STUDY
The scope of this study is limited to all the insurance companies in Rivers State, comprising of IGI insurance Companies Leadway Assurance Company, ADIC Insurance Company, African Alliance Insurance Company Limited, African Safety Insurance Co. Ltd, Anchor Insurance Co. Anchor Insurance Co. Ltd and African Safety Co. Ltd all in Port Harcourt. The scope will not go beyond the evaluation of the performance of reinsurance to the development of insurance industry.
1.7 LIMITATION OF THE STUDY
The most limiting factor encountered in course of carrying out this research work was lack of fund. Also, the time duration required for the completion was too short, hence not encouraging. Sourcing of material was a difficult task due to the fact that some materials were not available at the time writing. This spelt some physical hindrance encountered when carrying out this work but it did not affect its originality
1.8 DEFINITION OF TERMS
Claim: Claims and loss handling is the materialized utility of insurance; it is the actual product paid for.
Fraud: Fraud can be describe as a conscious premeditated action of a person or group of person’s with the intention of altering the truth and or fact for selfish personal monetary gain.
Management: Is the process of leading and directing all or part of an organization, often a business, through the deployment and manipulation of resources (human, financial, material, intellectual or intangible).
Insurance: Is defines as an arrangement by which an insured transfer’s its risk (uncertain tendency to loss) to the insurer at an adequate fee called premium. On the promises that the insured shall be indemnify or compensated upon the occurrence of the insured event.