Ugandans and companies buying insurance policies will likely pay
higher premiums after insurance companies discovered widespread fraud by
hospitals and some customers in the medical insurance side.
The increased premium cost is a direct impact of fraud in
insurance with insurers moving to cover that risk.
It is not yet clear by what margin the cost of premiums will raise but several
players said insurers will seek to transfer cost of investigation and allowance
for fraud to innocent customers.
Abel Muhwezi, an investigator at the insurance fraud investigations unit at the
Insurance Regulatory Authority (IRA), said fraud increases cost of insurance
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At the start of this month, several insurance companies
blacklisted several hospitals for having been engaged in insurance fraud. The fraud
was commissioned by Uganda Insurers Association (UIA) and done by consultancy
Mash Research Africa.
The fraud, which included fictitious claims, treating non-card holders,
conducting unnecessary checks and using the two-tier pricing where cardholders
were charged highly than cash holders. Through this, claims run in billions of
Fraudulent claims and the cost of investigating suspected frauds lead to higher
premiums for honest customers, according to a study by Insurance Europe, the EU
insurance and reinsurance federation.
Also, as insurance companies indulge in investigating fraud, it will impact
their ability to deal with genuine claims quickly.
For unsuspecting customers, one analyst said, the health insurance can lead to
This is because some hospitals subject them to unnecessary and
sometimes dangerous procedures to claim insurance.
The immediate impact of the revelation of fraud would be dwindling trust in the
sector, especially for the innocent customers whose covers are burned quickly
because of fraud.
Uganda’s insurance penetration is still at dismal 1%.
But Brenda Namuganga, an insurance agent with Bartlett, said while the
revelation might have trust issues on the industry, the revelation is to raise
confidence that they are trying to root out fraud.
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For the hospitals blacklisted, Namuganga said, insurance is their lifeline,
driving traffic to their hospitals. Most hospitals make more money on insurance
clients than those who pay with cash.
They will push to get back, with new contracts with the insurers. She said the
suspension is temporary and some have already started renegotiating their
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International Medical Centre (IMC), one of the hospitals terminated by several
insurance companies, says it has "not engaged in the claims raised and
consider the termination premature and unfounded."
Insurance fraud is as old as insurance itself. In order to catch cheats,
insurers are turning to data analytics to uncover trends and patterns on member
and provider behaviour, according to several journals on the internet.
Suspicious claims are flagged red and companies take their time before they pay
them. Players in the insurance industry hope with this they can reduce on the
extent of fraud in the sector.