INSURANCE fraud is still a relatively new phenomenon in Slovakia. But perhaps that is because the nation has only recently defined what insurance fraud is.
The adoption of new legislation that directly defines insurance fraud has resulted in increased awareness of the problem. Still, some insurance companies are reluctant to talk about it.
For the rest of the world, insurance fraud is inevitable. World statistics estimate that 20 to 30 percent of all accidents involving insurance belong to the "scam" category. If it is an automobile accident, the fraud rate climbs to 35 percent.
Auto insurance fraud happens to be the most cited fraud offence in Slovakia, too. As company losses grow, hikes in premiums mount, and client discontent grows, insurance companies will be forced to pay attention to fraud, and perhaps more importantly, to its prevention.
Václav Bálek, the spokeman for Czech Česká pojišťovna, an insurance company that operates on the Slovak and Czech markets, says that companies that have historically ignored fraud will have to address the issue to remain viable.
"There are some insurance companies that do not talk about fraud even today. But from a prevention standpoint, fraud should not be a secret. Companies will have to start paying attention to fraud in order to reduce their losses and, through this, lower their premiums as well," he said.
Companies are doing more than recognising the issue - they are doing something about it. Lucia Muthová, a spokeswoman for Allianz-Slovenská poisťovňa, the biggest insurer in Slovakia, told The Slovak Spectator, "The number of insurance scams has an increasing trend, and that is just another reason why we have intensified our fight against them."
Insurance companies agree that the field of vehicle insurance is most often hit by scams, whether it is third-party liability insurance or insurance covering damages to your own vehicle.
Scam artists expect insurance settlements from faked car accidents, according to insurance experts. The insured party is usually the initiator of such a fraud. He submits untrue data and false documents to an insurance house and hopes for payment.
Detective Leo Šoukal with Česká pojišťovna says, "Such car accidents did not happen at all, or they were intentionally organised with both parties in the accident knowing each other. Or, an accident victim asks for settlement of claims from a previous accident."
Šoukal suggested that some fraud is beyond complicated - it is immoral. "A car accident can be provoked when a scam initiator takes advantage of an inexperienced driver in a different car," he said.
Travel insurance fraud and liability insurance fraud against employers are also "favourite" areas for scam artists.
"Many people tend to exaggerate damages on their property, but they should be cautious about overvaluing them. I would like to point out that people are committing fraud by providing incorrect data," said Šoukal. He added that authorities do not have to prove that monetary gain was a motive to prosecute violators of fraud.
Šoukal mentioned organised rings that cooperate with people on the inside - insurance company employees, police officers and lawyers. He says that groups have been known to travel throughout the country and even abroad to commit insurance fraud.
Insurance companies that are fighting against scams have established special investigative departments that look into suspicious accidents and cooperate with the police and other authorities. Former policemen are often employed there.
Accidents are considered to be suspicious when the extent of damages and claims are high, inadequately described and lack supporting documents. According to Česká pojišťovna, claims assessment departments identify about 80 percent of attempted insurance fraud. (Specialised fraud departments investigate only the most complicated or egregious cases.)
"Of course, not all suspicious accidents are attempted frauds. Sometimes claimants make mistakes," explained Bálek of Czech Česká pojišťovna.
Allianz-Slovenská posiťovňa emphasised that the Slovak legislation does recognise such terms as "insurance investigator". As a consequence, employees revealing insurance fraud do not receive protection under the law.
"We know from experience that insurance investigators suffer everyday from verbal attacks. There was one case of [a suspect] causing physical harm to our employee during an investigation. For these reasons, we would appreciate if legislation protecting these people was adopted. It would probably impact not only the Insurance Act but the Penal Code as well," added Allianz-Slovenská poisťovňa's spokesperson, Muthová.
Insurance companies would also welcome closer cooperation between their investigators and the police.
The Česká pojišťovna described some real examples of insurance fraud in Slovakia and the Czech Republic:
An owner of a truck told Česká pojišťovna that his vehicle had completely burned. He asked for Sk1 million (€30,000) to replace the vehicle. The company required documentation but the owner did not submit it. However, Česká pojišťovna, cooperating with state authorities, succeeded to find a witness of the accident. Apparently the hydraulic mechanism of the truck overheated during loading. A resulting fire caused only one part of the cabin to burn. The extent of the damage, therefore, was much lower than the owner originally stated.
A young motor biker filed a claim. Police sent documentation to the insurance company. Since the extent of the claimed damage was not appropriate to the description of the accident , the insurance company checked the invoices for the motorbike's repair. The company discovered the invoices were fake and not registered in the bookkeeping of the repair centre. The motor biker was accused of insurance fraud.
A car owner announced that his car was burgled and his car-radio stolen, along with other items. The claimant did not claim vehicle damage, saying that the thieves had succeeded in getting into his car without violence. The insurance company found out that the accident had not been reported to the police. Investigators also discovered the stolen articles in a pawnshop, where the owner of the car had taken them for sale. He alone "had stolen" them from the car and filed it as a theft with the insurance company.
"Defrauders are always one step ahead but we are catching up. And I think we are catching up quite quickly," Detective Šoukal concluded.