CHAPTER ONE
1.0 INTRODUCTION
Claims
settlement is one of the obligations expected to be discharged by the insurance
company, for if there are no losses resulting in claims, the need for insurance
would never arise and there would therefore be no need for existence of
insurance companies the most effective form of advertisement for any insurance
company is prompt and efficient claims settlement. Though, this does not mean
that all claims whether genuine or not must be settled by the insurer. Only
claims covered by the terms of the policy and on investigation, found to be
genuine should be settled by the insure and this must be done promptly and
equitably.
Moreover,
Nigeria insurance market should not ignore the complaints of the public on the
issue of claim settlement, most importantly in an environment consisting of
people with low insurance awareness. Presently, the performance of the industry
in the area of claim settlement does not encourage the public unfortunately; this
mis-understanding is as result of the insuring public ignorance of the concept
of insurance and factors that are usually considered in the process of claims
settlement. It has been observed that, most clients, as experienced in Nigeria
context, expect insurers to put them at exactly the same position they were
before the loss. However, the situation here is that a number of clients do not
consider the sum insured placed on the subject matter before asking insurer to
replace new ones.
Another
thing is that any claim pot forward must be done honestly, for if the claim is
fraudulent the client will forfeit all his benefits whether or not there is a
condition to this effect in the claims presented to the insurers will lead to
the forfeiture of all benefits the insured is entitled to.
1.1 BACKGROUND OF THE STUDY
Insurance
is an arrangement by which one party [the insurer] promised to pay another
party a sum of money if something unexpected should happen which causes the
insured to sustain a financial loss.
The
responsibility for paying such losses is then transferred from the policy
holder [insured] to the insurer. In return, for accepting the burden of paying
for losses when the event occurs, the insurer charges the insured a price, the
insurance premium the development of the insurance premium.
This
development of the insurance industry in Nigeria date back to 1921, Furthermore,
growth was not phenoinenal until the Nigeria economy of the 60’s and early 80’s
often described as the “mushroomed era” of the market obviously a lot of the
malpractices especially on claim settlement crept into the industry, which the
earlier laws of 1961 and 1965 could not effectively cope with.
There were cases of insurer denying
liabilities on the robbery of a car on the ground that only theft cover is
grouted.
The
creation and maintenance of a good public image present continuing difficulties
and mock still remains to be done. Also the danger of not appreciated by the
public little general information is available in other field such as public
liabilities, contractor, and all risk etc. In spite of this, the regulations of
any insurance company depend to a large extent on the sort of claim service
rounded by the company.
An
unreliable and inefficient claims department could rain the reputation of a
company once they discover that the company is reluctant to pay or delays
payment without good reason of their genuine claims.
In
order to guard against delay in the settlement of claims the insurance decree
of 1976 list some condition under which the director of insurance may council
the certificate of registration of an insurance company. Therefore, an
insurance who makes it a matter or regular practice of delaying claim payment
may stand the risk of having his licenses cancelled
1.2 PURPOSEOF STUDY
The
main purpose of this research work is to enlighten or educate the underwriter
as well as the insuring public on the need for this subject matter in order to
reduce its effect in the insurance industry.
1. To
identify the various types of fraud and the methods of detecting and handing
fraud in various classes of business in insurance industry.
2. To
examine its implication on corporate organisation,and individuals.
3. To
know its effect on the economic development of the country
4. To
serve as a reading materials to students of insurance students and students of
others professional body that may want to read about insurance claims.
1.3 STATEMENT OF PROBLEM
Defrauding
of insurance companies is compounded by the present day hardship low standard
of living and low per capital income in content with what we used to hade in
the good olden days when the oil money was flowing. This unbearable situation
has pushed many into defrauding financial institution like insurance company.
Nowadays,
rate of crime has become uncontrollable, mostly because undue regard for
materialism and wealth, unemployment, disappearance of ethical and moral valves
and the legal system resulting in a rapid change of the social system for
worse.
1.4 SIGNIFICANCE
OF THE STUDY
Significance
of this research work is to examine the problems, And give possible solutions
to fraudulent insurance claims in Nigeria. It will provide useful information
to underwriter, insurers, brokers and agent and also the general public.
It
is to establish various stage of fraud and methods that can be used to handle
and minimize fraudulent claims. It is also to discourage those members of the
public that believe insurance companies have nothing to detect the existence of
fraud
The
recommendation that will be made in this research if properly implement will
enable the insurer to easily detect and reduce fraudulent claims. It will also
help other researchers in directing their minds to better method of handling
fraud in various classes of insurance.
1.5 SCOPE OF THE STUDY
This
research work will be restricted to detection and handing of fraudulent claims
in marine, life, property and motor insurance. The reason for this is as a
result of the limitations which are stated below. The researcher will also
concentrate on insurance company and insuring public in Lagos state for the
purpose of the research work.
1.6 LIMITATION OF STUDY
This
research work faced a lot of limitation and problems such as non-availability
of relevant literature and past work on this research topic.
Another
thing is that, those companies visited for documents that are very vital to
this study refused to release them for analysis.
There
is also the problem of transportation and booking of appointment interview
which is the main area of primary data
Finally,
there was also problem on the part of the insured; they complained for tight schedule of programmes
and always rescheduled our meeting.
1.6 DEFINITION OF TERMS
The
common terms to be used and their various definition are however defined below
for the purpose of a layman who may not be conversant with the terms:
IUSURED:- The
party entitled to receive money under an insurance contract on
the happening of a stated contingency insured
against.
INSURER:- The
party who agree in return for a premium, to pay money to
another party know as the insured or assured on the
happening of a stated contingency.
SUM INSURED:-
The amount payable on the happening of the contingency
insured against.
PREMIUM:-
The consideration paid to the insurer to source the payment of the
sum insured on the happening of the contingency
insured against.
POLICY DOCUMENT:- The
policy is the written or typewritten document
which
contains the trms of the contract.
THIRD PARTY:- Anybody
outside the contract between the insured and
insurer are referred to as third
parties because they are not Q parties
to the insurance contract.
1.
HAZARD:-
There are two types of hazard, they are;
a)
Moral hazard
b)
Physical hazard
a) Moral
hazard: This deals with the attitudes and conduct of people. This will be primarily
the conduct of the insured, but that of his employees and society at large have
an ever-increasing influence in assessing moral hazard.
b) Physical
hazard: This relate to the physical aspect of the subject matter of insurance,
which are likely to influence the occurrence and or severity of loss
CLAIM FORM
It
is an accident report form to facilitate the initial injury, a claim form is
completed by the insured reporting the details of the accident.
SALVAGE
It
could be said to be the remnant of what remains of the property insured after
the happening of event insured against the ownership of the salvage property
passes to the insurers who may sell it or deal with it as they see fit.
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