Islamabad (Oct 16) The insurance industry in Pakistan is not just facing pressure, but a significant threat from the surge in fake claims. This has led to a call for urgent action to strengthen verification systems and tighten regulatory oversight.
Insurers have reported a rise in suspicious claims over the past year, with fraudulent payouts estimated to have cost the sector billions. Several firms have launched internal audits and referred cases to the authorities for investigation.
A senior executive at a leading insurer, requesting anonymity, said, “Fraudulent claims have become organised and technology-assisted. Fake documents, duplicate medical bills, exaggerated accident reports and factory fires are now routine. This not only drains company reserves but also raises premiums for genuine customers.”
Small and medium insurers appear particularly vulnerable as they lack advanced digital verification tools and depend on manual processes. Insiders have urged the authorities to fast-track a centralised claim verification system and enhance penalties for internal collusion.
However, some officials warn that excessive scrutiny could delay legitimate claims. There’s a fine line between tighter controls and harassment of policyholders. The regulator must balance anti-fraud efforts with fair claim settlements.
Fraud risks could undermine public trust and slow insurance penetration, already low at less than 1% of GDP. For households, rising premiums due to insurance fraud add to inflationary stress, as they have to allocate more of their budget to insurance. For businesses, delays in claim settlement disrupt cash flows and risk management, potentially leading to financial instability and affecting their ability to invest and grow.
According to insiders, the factory owner allegedly sought indirect assistance from certain officers and attempted to pressure the insurer through threats and a media campaign. In response, the insurance company has requested multiple agencies to investigate the matter. It has also filed a court case against the accused.
Unchecked fraud not only hurts insurance firms but also raises costs for honest businesses and policyholders, sources said, adding that stricter penalties are needed to ensure transparency.
