Causes, Effects and Deterrence of Insurance Fraud: Evidence from Ghana

Abstract

This study measures the extent of effects of insurance fraud on the financial performance of insurance companies in Ghana. It also examines the causes, and stringent measures that can be used to fight against insurance fraud. Primary and secondary data obtained from 39 insurers in Ghana are employed in this study. A multiple regression model is used to determine the relationship between financial performance and insurance fraud variables. The results from the model indicate that statistically insurance fraud has a significant negative effect on the annual return on assets (financial performance) of insurers in Ghana. Also, responses from the survey questionnaires indicate that weak internal controls, poor remuneration of employees, falsified documents, deliberate acts of policyholders to profit from the insurance contract and inadequate training for independent brokers are the major causes of insurance fraud in Ghana. To deter insurance fraud: effective internal fraud policy, rigorous assessment of insurance policies and claims of consumers, adequate training and supervision for independent brokers as well as application of technological tools and techniques are key methods to fight this menace. These findings are to have substantial implications on the techniques insurance companies will develop to fight insurance fraud and the policies that will be developed by governments and national insurance regulatory bodies to fight this menace. Keywords: Ghana, Internal fraud, Intermediary fraud, Policyholder fraud, Return on Assets