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Insurance companies face more fraud attempts in CEE region

20.1. 2010

World´s statistics indicate that 14% of all claims reported can be classified as insurance fraud and it is said that as many as 35% motor-vehicle insurance policy holders try to deceive insurance companies – in Bulgaria this percentage is even higher. Generali PPF Holding (GPH) companies are successfully fighting against simulations of car accidents, collisions made on purpose and fictitious bodily injury. Thanks to international cooperation and sharing best practices, detection of insurance frauds is more effective today than in the past. Clients do not often realize that insurance fraud is classified as a crime and in case of disclosure imprisonment is foreseen in most countries, even up to 15 years.

The prognosis of an expected growth in the attempts of insurance frauds was confirmed in 2009, in connection with the financial crisis. Generali PPF Holding companies have learnt how to face this phenomenon occurring every year all over Central and Eastern Europe: Česká pojišťovna in the Czech Republic, for instance, uncovers insurance frauds worth more than Euro 9 million every year, with an increase registered in 2008 to Euro 10.2 million – with 703 cases of revealed insurance frauds – and 706 cases in 2009 worth Euro 8.8 million. Generali Slovensko investigates at average almost 300 suspicious insurance events monthly in Slovakia and registered a +13% growth in insurance frauds in the first semester of 2009, compared to the same period of 2008, with saved values in the amount of Euro 700,000. The investigation team in Hungary detected 200 insurance fraud cases in 2008 and refused illegal claims in the amount of HUF 550 million (Euro 2 million). In Romania, just to mention a further example, denied fraud claims in 2009 amounted to Euro 300,000.

The area that is most affected by insurance fraud attempts, also according to world statistics, is motor-vehicle insurance, where it is said that there are 35% policyholders deceiving. In Poland, for instance, 62% of all detected frauds in the non-life market in 2007 was connected to MTPL and Autocasco/Hull insurance, with an increase to 70% in 2008. In terms of motor insurance, frauds occur across all brands but in the case of more expensive brands the amounts of money paid out for claims are higher and therefore more visible. Brands like Mercedes, VW, BMW or Audi thus appear in insurance fraud files more often than other brands, however, it does not mean that cheaper brands are untouched. For instance, in Bulgaria an increasing number of frauds concerning vehicles with a very law price value – between Euro 2,000 and 3,000 – was registered: most were fictitious thefts of the vehicles that in some cases were exported abroad or were “duplicated” through kitting out a different plate number of the vehicle.

Most common cases of motor insurance frauds include simulation of car accidents, attempts of conclusion of insurance contracts after the real accidents or with the presentment of fictitious invoices for the car maintenances and claims of higher indemnity than customer is entitled to have.

In the non-motor area, a considerable number of insurance frauds are connected with fire because the offenders believe that fire will destroy all evidence and they will get large sums of money as compensation for damage. Cases connected to life insurance include reporting fictitious bodily injury, falsifying of medical documentation, drawing life insurance policies of terminally ill persons and intentional concealing of facts.

GPH companies in most CEE countries have established their own Insurance Fraud Prevention Departments dealing with all suspicious insurance claims. Some companies established such division long time ago, like Generali Providencia in 1992 and Česká pojišťovna back in the second half of the 1990s, whereas some other companies have just lately developed their own units, like Generali Garant’s Accident Investigations Department established in Kiev in August 2009. Employees who work in such departments usually have justice or police background. They have own channels and methods to collect information and most of the times the work on gathering proofs is quite confidential. All suspicious claims are checked by specialists who very often cooperate with the Police investigating crimes in which the suspicious person is a policyholder. Cooperation with other insurance companies is also common, both at country and international level.

In many cases of insurance frauds the clients do not realize that their attempt is classified as a crime in fact. Below table shows the number of years of imprisonment according to the legislation in some CEE countries, in case of disclosure of insurance fraud: 

Insurance frauds are considered by most of the insured persons as a crime without victims, in which the only ones who suffer financially are the profile companies. This is certainly false as insurance frauds affect us all. Insurance companies all over the world, in fact, pay high attention to insurance fraud detection. The reason is obvious. If they did not fight against fraud, the amount of premium would have to be much higher. Actuaries would have to include into their calculations also the amounts paid out for accidents which either never occurred or happened in a different way.

Examples of Insurance Frauds in CEE Countries

1. A driver in a Renault hit a tree in a remote place in the Czech Republic. Though it was an awful crash, the driver got out of the car without injury. She made a phone call and in half an hour her damaged car was loaded on a tow truck and hurried away. The following day the towing car moved the crashed Renault as well as the driver back to the place where the accident occurred and unloaded the car by the same tree. The driver made a phone call as she did the previous day. After a while the police and another tow truck arrived. What was the reason for all that? When the driver hit the tree, she was under the influence of alcohol and she knew that her claim would have been rejected and no benefits paid out from Casco insurance. The following day she had no alcohol in her blood and so she did not call her friend with a tow truck but the police. However, she did not realize that there was a witness watching her both days and considering her behaviour strange….

2. In Pazardjik (a middle-size Bulgarian town) an expensive car was sold to a person who could obviously not afford to pay so much money for such a vehicle. The chosen person was terminally ill. Before the death of this person, with a power-of-attorney the car was transferred to another person who declared it stolen shortly after the death of the original owner. When the experts from Generali Insurance started to work on the case, it suddenly became clear that the car was imported from Germany but no documents and registration from German producer or previous owner were found. The current owner had a police record so the experts started to observe the case closely while all above mentioned circumstances became clear. As expected, after complete investigation, the insurance company had full rights to reject payment over this claim.

3. After taking out a large face-amount life insurance policy, a lady in Hungary made an insurance claim stating that her husband died at sea in 2006 during a surfing accident in Greece. Claimant had taken out life insurance policies with death benefits in a total amount of approximately HUF 100 million (Euro 376,000) at several insurance companies. All insurance companies refused payout and hired a private detective who determined that the insured, claimed to be deceased, actually lived in a ranch in the Czech Republic or Slovakia. In light of this information the police arrested him and his accomplices and prosecuted them in Hungary. Generali would have been required to pay about HUF 20 million (Euro 75,000).

4. Following is an example of frauds organized in cooperation with the Traffic Police, detected in Serbia. The owner of an approximately 500-euro-worth car registered in Serbia inflicted a car accident on a remote mountain road by “colliding” with a very expensive Mercedes, registered abroad. The police arrived at the place of the accident and made an official report with ambiguous content accompanied with a few blurred photographs of a damaged vehicle and the accident itself. Immediately after the accident, the damaged vehicle left Serbia to be “repaired” abroad. Eventually, Delta Generali Osiguranje received a bill for reparation costs exceeding Euro 20,000.

5. In 2009, in Romania, an employee of the public authorities, who owned a BMW car, reported a Euro 8,000 damage to Generali, mentioning that a Citroen had hit him from behind and thrown his car against a fence, which caused a damage on both the front and the back of his BMW. All the repairs had been made at a service company that Generali had never worked with before. After a careful research conducted by Generali, it was found out that the service company belonged to the BMW owner himself, and the person who had hit him, the Citroen owner, was an employee of his. Furthermore, the research revealed that the frontal damages on the car were one year old and that they had already been paid for by another insurance company. At the same time, it was found that the Citroen involved in the accident had been purchased a few days before and that it, too, had been insured by Generali and the owner was also going to claim for damages. 

Generali PPF Holding B.V. operates in 14 Central and Eastern European countries: the Czech Republic, Slovakia, Poland, Hungary, Romania, Bulgaria, Ukraine, Russia, Serbia, Montenegro, Slovenia, Croatia, Belarus and Kazakhstan. Through its subsidiaries, Generali PPF Holding manages assets exceeding EUR 12 billion and serves more than 10 million clients across the region. Generali PPF Holding is registered in the Netherlands and its main organizational branch is based in Prague, the Czech Republic. Generali PPF Holding B.V. is a joint venture company of Assicurazioni Generali (51% share) and PPF Group (49% share). 

For further information please contact:

Generali PPF Holding Communications Department:

Silvia Varagnolo                                          Richard Kapsa
Communication Specialist                           Head of Communications
Generali PPF Holding                                  Generali PPF Holding
Tel.: +420 224 174 452                              Tel.: +420 224 555 893
GSM: (+420) 725 733 711                          GSM: +420 603 280 971
e-mail: varagnolo@generalippf.eu              e-mail: kapsa@generalippf.eu