by NG MIN SHEN / pic by MUHD AMIN NAHARUL
A FRAUD Intelligence System (FIS) will be launched in August next year to combat insurance fraud, which is estimated to comprise some 10% of insurance claims.
The first phase of the system will target the motor insurance segment as it is the largest division of the insurance industry, and motor insurance claims payouts are also the highest among all segments.
ISM Insurance Services Malaysia Bhd chairman Kong Shu Yin (picture) said based on international benchmarks, approximately 10% of insurance claims are fraudulent.
“The local industry in 2016 paid out a total of RM5.8 billion in motor insurance claims last year, so 10% of that is RM580 million. With this system, we target to lower the percentage of fraudulent claims to 2% (for motor claims),” he told reporters at the Malaysian Insurance Summit 2017 in Kuala Lumpur yesterday.
Kong said the 2% is based on achievements from other countries, which have reduced claims fraud by between 3% and 5% through implementation of the FIS.
“In the future, the system may be extended to other classes of insurance,” Kong said of the FIS, which was launched by Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim at the Malaysian Insurance Summit 2017.
A successful pilot run was conducted in September 2017 with four companies. FIS utilises data science to allow operators a holistic approach to assessing claims in order to detect potential fraud.
The Malaysian insurance and takaful industry has invested over RM10 million in the system, which was developed together with BAE Systems AB to provide insurance companies and takaful operators with the ability to detect and investigate insurance fraud.
Kong further said that with the liberalisation of the motor insurance industry, any additional cost and savings will be passed down to the consumer, hence, any savings gained from eliminating fraud will benefit the customer.