The latest developments across the P&C insurance industry regarding fraud, risk and compliance.
26 September 2016

What can insurance regulators around the globe learn from the Philippines?

The Insurance Commission (IC), a regulator for the Philippine insurance industry, has undertaken serious anti-fraud measures. The organization has issued guidelines requiring all life and non-life insurance companies to formulate and maintain procedures for the monitoring and early detection of insurance fraud.

One year time frame

what-can-insurance-regulators-around-the-globe-learn-from-the-philippinesRegulators in various countries around the globe came up with several anti-fraud plans and fraud awareness campaigns, but this Philippine regulator can be stated as progressive. Especially since their initiative, “Guidelines in the Development of Anti-Fraud Plan for Insurance Companies”, is not without obligations. Insurance companies in the Philippines should provide their anti-fraud plans to the IC within one year.

Statement of the IC

“The concept of mandating the submission for an insurer of an anti-fraud plan was developed to encourage insurers to proactively fight insurance fraud. It is necessary that all insurance companies are ready to combat insurance fraud for their own protection and for the welfare of stakeholders’’, says Insurance Commissioner Emmanuel Dooc.

“To adequately protect itself from the risks posed by insurance fraud, every insurance company should have an appropriate framework in place to prevent, monitor and investigate its occurrence.”

Prevention, detection and investigation

It seems that the regulator wants insurers to take measures that concern multiple disciplines. The insurer’s plan should include an anti-fraud policy that affects the entire organization. Each anti-fraud plan has to contain measures to protect the company from:

  • policyholder and claims fraud;
  • intermediary fraud perpetuated by agents or brokers;
  • internal fraud.

Insurers are required to observe the minimum standards set forth in the Guidelines concerning their anti-fraud efforts, including the following:

  • fraud prevention;
  • fraud detection;
  • fraud investigation;
  • reporting of fraud;
  • anti-fraud awareness, education and training.

The Guidelines also require the inclusion of a fraud warning in the claims form or any document to be filled up by an insured in making a claim.

Mr. Dooc also said: “The Guidelines only provide for the minimum requirements for insurance companies in the preparation of a new or revised anti-fraud plan in order to provide flexibility for each company to adopt an anti-fraud plan suitable to its own circumstance. Insurance companies must be organized and their businesses must be conducted in such a way that they are able to monitor fraud risks across all lines of businesses on a continuing basis and to initiate measures to address them suitably in order to enhance their financial risk management.”

Prevention rather than cure

More proven fraud is found at underwriting, for instance when wrong information is provided or information is deliberately kept silent when applying for an insurance policy. The amount of proven fraud from investigations at underwriting lies around 50% (Dutch insurance industry), which is much higher than at claims (35%). Fraud prevention is in general more difficult to prove, but much more cost effective than detecting and proving fraud of unjustified claims that have been paid out. “Insurers are frequently underestimating the value of an extensive risk assessment at underwriting, which enables insurers to keep potential fraudsters out in the first place”, says Christian van Leeuwen (CTO, FRISS). It would be interesting to see how the Philippine insurers will cope with prevention, as well as with the alignment between underwriting and claims.


Remarkable enough, the guidelines do not explicitly mention digitization. In line with the increasing digitization, insurance applications and processes are becoming more automated. This makes it easier for fraudsters to digitally manipulate insurers by obtaining a false identity or address data. Already a number of insurance companies are using their own apps to file a new claim, with all information and even with images of the actual damage attached to. It is  just one example  in which digital information becomes available for the insurance process. “Not all insurers are aware of how easy it is to manipulate images. By manipulating images, fraudsters can even fake complete claims or damages”, Van Leeuwen explains.

Keep an close eye

All in all, the vision and measurers from the Philippine regulator IC sound promising. Insurance regulators and companies from other countries might want to keep a close eye on the way this evolves. Will the insurers live up to these measures? And if yes, how? Could other insurance markets benefit from this approach and the outcomes? To be continued within a year from now.

Source: Asia Insurance Review

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