Haris Ashley
Insurance fraud in Russia is a significant issue, with insurance companies paying out over 50 billion rubles to fraudsters in a single year. This phenomenon is driven by various factors, including a lack of trust in insurance companies, cultural attitudes towards improper benefits, and legislative gaps that make it challenging for insurance companies to prevent fraud effectively. Auto insurance fraud is particularly common, with criminals also expanding their activities into health and property insurance. To combat this growing problem, Russia has proposed amendments to the Criminal Code to introduce stricter punishments for insurance fraud and strengthen anti-fraud methods.
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What You'll Learn
Auto insurance fraud is common
There are several reasons why auto insurance fraud is so prevalent in Russia. Firstly, there is a general distrust of insurance companies among the Russian population, with many believing that insurance companies deceive their clients. As a result, some people do not feel guilty about overestimating the number of losses or exaggerating real damage to increase compensation. Additionally, there are gaps in legislation and difficulties in cooperation with the police, which make it challenging for insurance companies to prevent and combat fraud effectively.
Furthermore, auto insurance fraud is often facilitated by employees of insurance organizations, who may be enticed by the promise of a percentage of the compensation received. This insider involvement can make it more difficult for authorities to detect and prevent fraud. It is also worth noting that proving insurance fraud in court is difficult, and the number of fraud cases is expected to increase due to declining living standards.
To combat auto insurance fraud, the Russian Ministry of Finance has prepared a draft amendment to the Russian Criminal Code, suggesting the addition of an article stipulating criminal responsibility for committing fraud in the insurance sphere. This amendment would provide punishment for both dishonest clients and employees of insurance companies involved in fraudulent activities.
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Many Russians don't trust insurance companies
The issue of distrust in insurance companies is not unique to Russia, as evidenced by comparative studies on insurance fraud in Russia and other countries. These studies have found that insurance fraud is often viewed as a crime of policyholders against property, as seen in the criminal codes of other nations such as Texas and Denmark.
The lack of trust in insurance companies in Russia may be attributed to several factors. One factor could be the perception that insurance companies are deceptive. According to the RUA survey, some citizens believe that insurance companies deceive their clients, which may lead to a sense of justification for committing fraud. Additionally, there is a perception that insurance companies do not adequately compensate their clients. This perception may be fueled by disputed situations where the insured feels that the compensation offered by the company does not adequately cover their losses.
Furthermore, the process of obtaining compensation can be complex and challenging. This complexity may lead to a sense of frustration and dissatisfaction among policyholders, potentially driving them to resort to fraudulent means to obtain what they feel they are owed.
Another factor contributing to the distrust of insurance companies in Russia could be the perceived inefficiency of fraud prevention strategies. Experts have pointed out gaps in legislation and difficulties in cooperation with the police, which make it challenging to effectively combat insurance fraud. This perception of weak fraud prevention measures may encourage individuals to engage in fraudulent activities, believing they can exploit these loopholes without consequences.
The high prevalence of insurance fraud in Russia has significant implications for both insurers and policyholders. Insurance companies have paid out substantial amounts to fraudsters, impacting their financial stability and potentially leading to higher premiums for honest policyholders. Additionally, the increasing number of fraudsters can lead to a further decline in trust among Russians, creating a vicious cycle that exacerbates the problem.
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Gaps in legislation and police cooperation
Gaps in legislation and difficulties in cooperation with the police are the main sources of inefficiency in the fraud prevention strategies of Russian insurance companies.
According to a 2019 survey of 20 experts and professionals from leading insurance companies in Moscow, more than half of whom are former police officers, Russia's fraud prevention strategies are inefficient due to gaps in legislation and police cooperation. The respondents agreed that both insurers and fraudsters actively use new technologies to their advantage.
Fraudulent claims in compulsory third-party liability motor insurance remain the most common activity among Russian criminals, with a quarter of incidents related to the issuance of a CMTPL insurance policy after an insured event, and a third related to staging an accident. About 15% of fraudsters deliberately falsify facts related to the insured event, such as claiming the driver was drunk or took drugs. More than half of all insurance fraud in Russia is carried out with the help of employees of insurance organizations.
The Russian Union of Motor Insurers (RUA) survey revealed that 30% of citizens believe that all insurance companies deceive their clients and therefore do not consider it a crime to overestimate losses. This loyal attitude towards receiving improper benefits is a significant contributor to the high rate of insurance fraud in Russia.
To combat fraud, the Union of Insurance Companies has proposed an amendment to the Russian Criminal Code, suggesting adding an article that stipulates criminal responsibility for committing fraud in the insurance services sphere. This amendment would provide punishment for both dishonest clients and employees of insurance companies.
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Fraud prevention methods are strengthening
The Russian government and law enforcement agencies are taking active measures to combat insurance fraud. There is now a solid court practice of punishing those found guilty of insurance fraud, with the police and courts adopting a more stringent attitude towards these crimes. This marks a shift from a few years ago when the police were reluctant to investigate cases due to the likelihood of losing in court. The blocking of internet resources that offer to sell fake insurance policies is another effective method being employed to combat online fraud.
To address the challenges in cooperation with the police, as identified by experts, the Russian Union of Motor Insurers (RUA) is playing a crucial role in fraud prevention. The RUA conducted a survey that revealed valuable insights into the public perception of insurance fraud. The survey found that 30% of citizens believe that all insurance companies deceive their clients, which may contribute to a justification for overestimating losses. Additionally, the RUA survey highlighted that a quarter of fraud incidents are related to the issuance of a CMTPL insurance policy after an insured event, and a third of frauds involve staging an accident. These insights help insurance companies and law enforcement identify and understand the prevalent methods used by fraudsters.
Insurance companies in Russia are also strengthening their internal fraud prevention measures. Security departments within these companies are actively identifying and recording various fraud schemes, such as drawing up insurance contracts retroactively, intentional exaggeration of damage to increase compensation, and collusion between employees, workshop staff, and clients to overestimate repair costs. By recognizing these red flags, insurance companies can implement more effective countermeasures and cooperate more closely with law enforcement to bring fraudsters to justice.
Furthermore, there is a growing demand for a broader understanding of the insurance fraud problem and related crimes. This includes improving legal education for the population to neutralize false and criminogenic stereotypes that contribute to insurance fraud. By enhancing societal awareness and understanding, Russia aims to create a cultural environment that promotes the fight against insurance fraud and encourages ethical behaviour.
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Fraud is expanding to health and property insurance
This expansion of fraud into health and property insurance is due to a variety of factors. Firstly, there is a general distrust of insurance companies among Russian citizens, with a survey by the Russian Union of Motor Insurers (RUA) finding that 30% of citizens believe all insurance companies deceive their clients. This leads to a perception that it is not a crime to defraud insurance companies, with some even bragging about it on social media. Secondly, there are gaps in Russian legislation and difficulties in cooperation with the police, which make it challenging to prevent and prosecute fraud effectively. Thirdly, both insurers and fraudsters are quick to adopt new technologies, which can be exploited to commit fraud.
Fraudulent activities in health and property insurance can take various forms. For example, in the case of health insurance fraud, individuals may intentionally exaggerate their damage or loss to increase their insurance payouts. They may also collude with employees of insurance companies and medical providers to overstate the cost of medical treatments or procedures, with the excess amount being divided among the parties involved. Property insurance fraud can involve submitting fraudulent documentation, such as inflated invoices or construction contracts, to support inflated insurance claims. In some cases, individuals may even stage an "insured event", such as a fire or accident, to make a false claim.
To combat this expanding fraud, insurance companies, and law enforcement agencies are implementing various measures. Insurance companies are sharing methods of combating fraud and cooperating on anti-fraud issues. For instance, the Russian Union of Auto Insurers (RAMI) launched the "Bureau of Insurance Histories" project to facilitate collaboration among insurers. Additionally, the Russian Ministry of Finance has prepared a draft amendment to the Russian Criminal Code, proposing to include an article that establishes criminal responsibility for committing fraud in the insurance services sphere. This amendment would apply to both dishonest clients and employees of insurance companies.
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Frequently asked questions
A Russian Union of Motor Insurers (RUA) survey revealed that 30% of citizens believe insurance companies deceive their clients and, therefore, do not consider it a crime to overestimate losses. Fraudsters actively use new technologies, and fraudulent claims in compulsory third-party liability motor insurance remain the most common activity among Russian criminals.
Some examples of insurance fraud in Russia include drawing up an insurance contract retroactively and the intentional exaggeration of real damage to increase insurance payouts.
Insurance companies paid out more than 50 billion rubles to fraudsters in Russia in 2016, representing 10% of all insurance payouts for that year.
Existing gaps in legislation and difficulties in cooperation with the police hinder the effectiveness of fraud prevention strategies employed by Russian insurance companies.
The Russian Ministry of Finance has prepared a draft amendment to the Russian Criminal Code to introduce criminal responsibility for committing fraud in the insurance sector. There is also a solid court practice of punishing those guilty of insurance fraud.
