I am sure you have been making this complaint over the years, but didn’t have much choice since prices are around the same and policies are designed to be sticky or not so advantageous to get out of (that’s for another day).
Singapore General Insurance
Association says so too!
But now, ladies and
gentlemen, we have the ultimate confirmation. This comes from the GIA the
association that groups General Insurers in Singapore “About
two in 10 motor insurance claims in Singapore are fraudulent, often involving
exaggerated injuries and inflated vehicle damage”(1)
And the president of
Budget Direct
The president of Budget Direct, who usually prides itself in competitive rates even admitted: “In the end, all motorists are victims of motor insurance fraud as we all end up paying higher premiums as a result”
This is the key you see, the claims paid out in fraudulent cases simply get translated into increased premiums for ALL vehicle insurance customers. Irrespective of whether you commit fraud, are a scam victim, or are accident/claim-free, you are paying for the fraudsters’ bread butter and cake, and the insurers maintain their healthy margins and profits
The Insurers have no
incentive to act on fraud
The thing is the GIA
is saying, it is up to you, the customer to stop the fraud. And that I find laughable.
Let’s see what are the main causes of fraud as per GIA …
- Beware of Phoney Helpers: After an accident, individuals may offer
"help" and pressure victims to follow their directions, often
leading them to unauthorized repair shops or overpriced towing
services.
- Staged Accidents: Scammers stage accidents, causing victims
to collide with their vehicles and then falsely accuse victims of causing
the collision. They often fake injuries and make substantial claims for
damage and injuries.
- Phoney Witnesses: Suspect convenient witnesses who support the other driver's account, often suggesting a staged accident.
1 Unauthorised repair
shops:
Most vehicle owners
are aware of the workshops that their insurer accepts, whether by own bad
experience, by hearing from friends and family, or from the insurer. Plus, most
of the time, unauthorized repair shops costs are not paid by the insurer, if
they are, it is a bit rich on the part of insurers to honour the claim while
complaining about it.
Plus it is not rocket
science to detect highly inflated claims based on pictures and description that
accompany the claims. I know because I worked in an insurance company in a much
less developed country than Singapore, and I know for fact that they have the
data needed to deal with this, the question is financials and will.
2 Staged Accident
And how is that the
fault of the insured? The insured is getting scammed at the same time as the
insurer, unless GIA is claiming that the insured is somehow going along with
the scammers… more on this later
3 Phoney Witnesses
Again, how will someone
who has just been in an accident be able to detect whether witnesses are phoney
or not?
Unless Singapore is a
nation of scammers (not scammed/scam victims (2)), it just doesn’t make sense
to think that individual people involved in accidents are part of the scam. So
should victims pay the price twice (once being scammed and second via
higher premium, and probably loss of NCB)?.
So my arguments that
follow assume that Singapore is not a nation of scammers (unlike (3)). Afterall
Singapore is only beaten by Finland, New Zealand, and Denmark in terms of corruption
perception. (4)
The fact that GIA
mentions Staged Accidents, Phoney Witnesses seems to indicate syndicates are
at play, or at best a group of people who are in the business of scamming
accident vistims. In fact, it is likely that staged accidents and phoney
witnesses occur together, rather than separately.
You can have a staged
accident without phoney witnesses, but very unlikely to have phoney witnesses
to a real accident.
So chances are, there
are syndicates/gangs/groups of scammers at work. It is ridiculous for GIA to
expect an individual consumer to be able to detect them, don’t you think so?
So what can be done?
The answer, in most of
my blogs, is Analytics!
Inflated Claims
I briefly mentioned the solution to GIA issue 1, inflated claims. Analytical models can be built to detect inflated claims. The beauty of this is that it can be even employed to detect which workshops are cheating.
But, from experience, there is little will power in senior management to do something that will rock the boat. It is important for analytics people to learn that not everything that can be done will be done, other factors come into play, obviously whether it is financially viable (in this case I am quite sure it pays for itself quite quickly, a couple of months of work to build, another month to finetune, and the low running costs for a basic solution), or politically (is it worth opening pandora’s box at your preferred workshops?).
In sum, technically easy to solve and pays for itself, management wise depends on management.
It's even worse at the
GIA level where, as people in SG know, some workshops are on the panel for
multiple insurers.
Staged Accidents and Phoney
Witnesses
Accidents, by their
nature, are (most of the time) unexpected, hence being able to, by simply
looking say at road and traffic conditions, location, it is not that straight
forward estimate the probability of an accident and highlight the stranger ones;
one of the reasons being that humans play a large role and it is not so easy to
get data on all actors involved, not only all drivers involved and their data,
but also drivers in the immediate vicinity.(5)
The easy way to detect
staged accidents and phoney witnesses is to focus on the people, not the vehicles.
The key assumption is that these are the work of groups of people. Hence they
are likely to play different roles at different times. Let me put it this way,
how likely is it that someone is a claimant, a witness of an accident, and at
fault for a vehicular accident all within say a year?
The idea is that, chances
are, a member of the group is likely to play different roles over time,
sometimes even with different insurers to make the chances of detection lower. This
is something very easy to pick up using social network analytics, especially
at the GIA or police level.
Conclusion
Saying that 20% of
claims are likely to be fraudulent and placing the onus on customers/insured in
the case of vehicular insurance in Singapore is a joke.
1 The main causes as
stated by GIA are unlikely to be caused by claimants
2 The GIA itself (or to
a lesser degree large insurers) are the ones who have the data easily at hand
to detect potential fraudulent cases effectively
3 however the insurers
(and the GIA) have little incentive to do so since they can simply pass the
costs to customers.
However, relatively
simple analytics can, right now, help alleviate this problem and allow customers
to pay lower premiums since the risk of fraud can be mitigated. It is just a
question of will from the insurers’ point of view.
- https://insuranceasia.com/insurance/news/20-singapores-motor-insurance-claims-are-fraudulent-giaj
- https://www.straitstimes.com/world/14-trillion-lost-to-scams-globally-s-pore-victims-lost-the-most-on-average-study
- https://www.youtube.com/watch?v=q5PI5ZtJTSY
- https://www.transparency.org/en/cpi/2021
- That is not actually true anymore in Singapore, I will explain in a subsequent blog.
