ABU DHABI // Insurance companies should be more willing to share information on customers to help plug a loophole in the system and prevent fraudulent claims, experts have said.
Of the 62 insurance companies in the UAE, 45 offer motor insurance. Of those, 34 cover 5,000 or more vehicles. So far, 21 share a database that ranks drivers so companies can adjust premiums accordingly.
Establishing a central repository of insurance claims data within the UAE market is vital, particularly when related to actual claims and accident experience, said Walid Sidani, president of Sidani Innovative Management Services.
“Real-time access would have a substantial impact on how risk profiling and assessments are conducted on a vehicle and driver,” he said.
Companies not included in a database may not be able to identify a potential client’s risk of filing a fraudulent claim and may suffer losses, said Pascal Persoon, chief executive of eData in Dubai, which has collected information on 1.5 million motor vehicle claims in the emirates.
He said an insurance company chief executive recently admitted to him to losing more than Dh400 million in fraudulent claims over the past few years.
“It was because of a big loophole in the whole system where a number of drivers with bad driving records or drivers with fraudulent claims all went to this particular company,” he said.
People who caused accidents often move to a new insurance company as soon as possible to get a lower premium.
“Certain groups talk to each other and refer those with multiple accidents to insurers that do not perform any routine background checks or verification,” Mr Persoon said.
With data made available to all insurers, drivers could no longer hide material facts such as accidents.
If someone has filed one or more claims on a vehicle, the insurance company is more likely to charge a higher premium because they believe the driver poses a greater risk.
Vipin Kumar Kovumal, 29, an office administrator in Abu Dhabi, does not see any reason why insurance companies should not share data.
“I’ve not caused an accident since 2010 so I don’t mind if they share information,” he said. “I normally deal with brokers who send me a quotation and I choose the cheapest offer.”
A shared database “would naturally complement the current pricing parameters implemented by the Insurance Authority”, said Mr Sidani, a former chief executive of Abu Dhabi National Insurance Company.
Effective January 1, 2017, new maximum and minimum premiums will be set depending on vehicle type, under a new vehicle insurance tariff system, on which premiums are based.
“It would allow insurance companies to gauge and fine-tune their pricing model, based on historical driver behavior and actual vehicle claims experience,” Mr Sidani said. “A simple comparison in terms of process and outcome is in how the UAE credit bureau mechanism helps individuals and financial services improve and manage their credit risk.”
Muhammad Ashfaq-ur-Rehman, a management consultant and adviser for financial and non-financial institutions, agreed.
“An insurance contract is considered an ‘utmost good faith contract’ but access to central data can combat fraudulent activities in motor claims,” he said. “The practice will benefit the insurance companies for profiling, pricing and managing the risk prudently, and also safeguard the interest of customers.”
The loss ratio of insurance companies will drop by at least 20 to 30 per cent when sharing claims and adjusting the premium towards the risk, Mr Persoon said.
“Customers will pay a fair premium based on accident history,” he said. “Government will also benefit since there will be fewer accidents, while the need for urgent services such as police and ambulances will be reduced.”
rruiz@thenational.ae