The problem of insurance frauds – agent and subagent dillemas

From the very outset of their operations insurance companies have had to address issues linked with fraudulent practices of their agents. However today they also need to face the problem of subagents named OWCA, which is an acronym of the Polish phrase: Osoba Wykonująca Czynności Agencyjne – an individual performing agency tasks, as defined in Polish Insurance Agent Law and Recommendation U.  As a rule, the irregularities discovered by insurance companies mainly concern life insurance policies, because they are sold on high commissions  which are not covered by the actually collected premiums on insurance contracts concluded unfortunately in bad faith.

Dishonest agents tend to ‘blow the bubble of bad sales’, thus successfully hiding their fraudulent transactions for a longer time. The sooner the insurance company uncovers such practices, the quicker it prevents the losses and attendant costs that would grow exponentially. In this fraud scenarios there might be engaged also organized criminal groups, which operate on a much larger scale.  To find out more about such groups, follow the link to an article published in Gazeta Ubezpieczeniowa. One of the organized criminal groups was operating in Poznań and it managed to obtain almost PLN 24 million by deception. Many staged individuals were engaged in its illegal practices and their involvement masked the fraudulent nature of the policies sold.

”Insurance frauds are nothing new, but insurers increased their focus on the problem. The quality of the underwriting and concluding contract is improving.  The availability and quality of the data collected by insurers are also continuously being enhanced. Different commission system solutions, including clawback mechanisms, are looked into. Nowadays, external experts are often engaged to confirm the credibility of the information provided at the moment of entering into insurance policies. If there are doubts, contracts are verified in detail. Whenever irregularities are disclosed, insurance companies are consistent in taking legal steps against persons and entities acting to the detriment of their principals”, explains Rafał Turczyn, Fraud Risk Management, Forensic and Dispute Services Leader, Deloitte. “As an external adviser, we increasingly often support our clients in limiting the costs associated with fraud. We also participate in analyses of cases that are most complex, and we support our clients in preparation of the structure of their legal claim,” he adds.

It should be highlighted that the Polish Financial Supervision Authority makes available information about registered agents and subagents to limit the risk of fraud and solve potential doubts associated with entering into insurance contracts.

For more information, please follow the link to our original post.

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