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Fighting Fraud

What is insurance fraud?

Insurance fraud is often perceived as a victimless crime, where no one is hurt.  The reality is very different.  The amount of premium paid by policyholders is affected by additional costs induced by insurance fraudsters.

Insurance fraud includes:

  1. Entering an insurance contract without providing truthful answers in the proposal form;
  2. Making a claim under an insurance contract for a loss based on misleading or untruthful circumstances; and
  3. Otherwise being misleading or untruthful in interactions with an insurer with the intention of gaining a benefit under the insurance contract.

Since the premium reflects the type of risk which a policyholder transfers to an insured pool of similar risks, being deceptive about a given risk ends up imposing an unfair cost on other honest policyholders who end up covering risks that should not form part of the pool of risks which they have joined.

Insurers are committed to investigate all potential frauds in order to ensure that honest policyholders do not end up subsidizing fraudulent claims through higher premiums.  For this reason, insurers routinely exchange information on customers’ claims history to help them identify potential frauds.  Such investigation has brought to surface several cases of suspected insurance fraud.

Committing insurance fraud (whether when applying for insurance or when claiming) is also likely to have long and serious consequences on the fraudster.  Besides endangering recoveries on genuine claims, fraudsters can face criminal prosecution and possibly a jail sentence and can expect to find it harder to get, and pay more for, future insurance.

What is the Malta Insurance Anti-Fraud Platform?

The aim of the Malta Insurance Anti-Fraud Platform is to prevent, detect and suppress insurance fraud and to facilitate the criminal prosecution of insurance fraudsters.

The names of the Insurers participating in the Malta Insurance Anti-Fraud Platform are shown below.  They are jointly the data controllers in relation to such data:

  1. Argus Insurance Co (Europe) Ltd
  2. Atlas Insurance PCC Ltd
  3. Elmo Insurance Ltd
  4. GasanMamo Insurance Ltd
  5. Mapfre Middlesea Insurance plc

 The platform is administered on behalf of these controllers by the: Insurance Association Malta, Unit 4, Level 2, 116 Msida Valley Road, Birkirkara BKR 9024, Malta

Overview

The Insurance Association Malta has an arrangement with the Local Enforcement System Agency (LESA)  to facilitate the collection of information about the circumstances of traffic accidents. These arrangements are known as the Traffic Accident Report Services Agreement or Tars Agreement.

This page has three main purposes:

  1. To explain the Tars arrangements
  2. To make it possible for persons who have been involved in a traffic accident to obtain information about that traffic accident; and
  3. To allow private individuals to find out what personal data is held about them in connection with these arrangements.

The information contained in a Traffic Accident Report constitutes basic data necessary for the settlement of claims. The European Parliament and Council (Directive 2009/103/EC) require that appropriate measures should be in place to make this basic data available for the settlement of claims.

Some of this information also constitutes personal data within the meaning of the Data Protection Act, and it is the duty of insurers to ensure that the processing of such data complies with this legislation.

ACCIDENT INSURANCE
Is cover offered for accidental injury, death, and/or related health expenses. It may also cover preventative services, medical expenses and catastrophic care, as per policy limits.ACTUARY

A profession which is skilled in the analysis, evaluation and management of statistical information. This skill evaluates risks involved in private insurance and social security in order to determine what rates and contributions have to be paid to build up a future benefit.

ADJUSTER
An independent professional individual who is appointed on a fee basis by insurers to settle large or complex claims.

ADVERSE SELECTION
Within a risk portfolio, the premia of the many should generally be expected to pay for the claims of the few. Adverse selection occurs when the low risk buyers withdraw leaving insurers with only high risks. In such a situation there is an imbalance. Policy premia can therefore be higher and in some cases insurers may refrain from insuring at all. In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.ALL RISKS

A description sometimes used for ‘personal possessions and valuables cover’ to mean ‘wider cover’.

ANNUITY
A life insurance product that pays periodic, usually yearly or quarterly, income benefits for a specific period of time or over the course of the assured’s lifetime for a defined or an undefined period.

ARBITRATION
An alternative to litigation for the settlement of disputes. Differences may be referred to an arbitrator, usually appointed by the respective insurers

ASSESSOR
An independent professional who advises policyholders on the settlement of their claims and negotiates such claims on behalf of the policyholder.

ASSETS
Property owned by an insurance company, including stocks, bonds and real estate.

BINDER
Is the authority granted to an insurance broker by an insurer to underwrite risks and settle claims on its behalf subject to pre-determined parameters.

BODILY INJURY LIABILITY COVERAGE
The liability which a motorist incurs when he injures or kills another person in an accident.

BROKER
(see Insurance Broker )

CAPACITY
Capacity is the availability of insurance to meet demand. It depends on the industry’s financial ability to accept risk. For an individual insurer, capacity represents the maximum amount of risk it can underwrite based on its financial health.

CAPTIVES
Captives are insurers that are created and owned by large buyers of insurance to provide themselves with cover. This may be considered as a form of self-insurance.

CASH SURRENDER VALUE
In the case of life insurance, cash surrender value represents the amount that the owner of a life policy will receive if the policy is terminated prematurely.

CASH VALUE

(See Cash Surrender Value)

CATASTROPHE
Term referring to singular events that may cause exceptionally heavy loss to insured property.

COINSURANCE
Is a means whereby two or more insurers share large risks together. Co-insurance could also refer to the means where an insured shares a part, percentage, of the risk.

CRASH PARTS
Are the sheet metal parts of a vehicle which are most commonly damaged in car crashes.

CREDIT INSURANCE
Is cover offered to commercial clients covering damages suffered due to debtors’ failure to honour obligations.

DEATH BENEFIT
This benefit refers to money paid to a beneficiary on the death of an insured. Alternatively, in the case of an annuity contract, it refers to the sum paid to beneficiaries if the contract owner dies before annuity payments begin.

DEDUCTIBLE
The percentage amount of loss paid by the policyholder. Generally, the higher the deductible, the lower the premium charged for the coverage.

DEFINED BENEFIT SCHEME
Is a retirement scheme which determines the retirement benefits in advance by a given formula. (see also Defined Contribution Scheme)

DEFINED CONTRIBUTION SCHEME
Is a retirement scheme the benefits of which are determined by the contributions paid into it, the accumulation of profits minus expenses and losses.

DIRECTORS AND OFFICERS LIABILITY INSURANCE
Covers the liability of directors and organization officials for damages suffered by third parties as a result of their fault and negligent acts.

DISABILITY
Term referring to the inability of an insured person to work due to an injury or sickness.

DOMESTIC INSURANCE COMPANY
(also referred to as Indigenous company)
When applied to Maltese domestic companies this refers to an insurer with its head office in Malta.

EARNED PREMIUM
The premium due to the insurer for the period of time he was on risk.

EARTHQUAKE INSURANCE
This type of cover insures buildings and their contents in the event of an earthquake. This is generally not part of a home policy and includes a substantial percentage deductible or excess on both buildings and contents.

ECONOMIC LOSS
(also known as Pecuniary Loss)
Financial loss as the result of the death or disability of a breadwinner, or from the destruction of property. Sometimes also referred to as loss of profits or loss of earnings. This term is preclusive of non-pecuniary losses.

EMPLOYER’S LIABILITY
Refers to the liability of employers in case where employees suffer injury or other damages during the course of their employment.

ENDORSEMENT
An endorsement is an attachment to the insurance policy that affects or alters the policy’s coverage, terms, or conditions. Also known as rider.

ENDOWMENT INSURANCE
Is a type of life insurance that provides a benefit payable on a pre-determined date otherwise known as the maturity date. If policyholder dies before maturity date benefits will pass to the beneficiaries.

ERRORS AND OMISSIONS COVER
See Professional Indemnity Insurance

EXCESS
The fixed amount of loss paid by the policyholder. Generally, the higher the excess, the lower the premium charged for the coverage.

EXCESS OF LOSS REINSURANCE
This refers to a contract between an insurance company and a reinsurer, whereby the reinsurer undertakes to pay all or part of the claim of a certain threshold.

EXCLUSION
A policy specification that precludes coverage for certain risks, people, property classes, or locations.

EXPERIENCE
Term referring to the history of losses.

EXPOSURE
Term referring to the level of risk in terms of likelihood of loss.

FACULTATIVE REINSURANCE
Is a reinsurance policy that gives coverage to an insurer for specific individual risks that are unusual or very large.

FIRST-PARTY COVERAGE
Refers to cover for the policyholder’s own property or person.

FRAUD
Fraud is when there is lying, concealment or misrepresentation by the parties of an insurance contract with the intent of financial gain.

FREQUENCY
Loss incidence. Generally a criterion in premia calculations.

FRONTING
Is when a primary insurer acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission.

GENERIC AUTO PARTS
(see also crash parts)
Vehicle parts produced by firms that are not associated with car manufacturers ie. non-original.

GROUP INSURANCE
A master policy offering coverage to a group of individuals. Generally covers employees of the same company, members of an organization and their dependents.

GUARANTEED DEATH BENEFIT
The guaranteed death benefits within variable annuity contracts.

GUARANTY FUND
Is protection for policyholders and third parties in case their insurer goes bust. In the Maltese context this is known as the Protection and Compensation Fund which is paid for by insurers (and ultimately their customers) who contribute a small slice of their revenue to a central fund. If an insurer defaults, this fund guarantees the claims against that insurer, at least up to a certain amount.

HEALTH INSURANCE
Health insurance is protection against losses incurred by the insured due to illness, accident or other covered causes. This type of insurance generally covers costs of medicinals, doctor visits, disability benefits, accidental deaths and hospital stays.

HOME INSURANCE POLICY
Is the insurance policy that covers the house and other structures on the property, as well as content of the house against risks such as fire and theft. The policy may cover the homeowner for accidental injuries caused to third parties within the property.

INCURRED BUT NOT REPORTED LOSSES / IBNR
These are losses that become apparent to the insurer, and therefore claimed, a number of years after the cause of injury and/or damage. Such losses may be incurred through the onset of a disease from exposure to hazardous conditions which debilitates the insured’s potential. This may arise either because the claimant delays to report the claim or because the claim only becomes apparent after a time interval.

INCURRED LOSSES
These are losses occurring within a determined period of time.

INDEMNIFY
To provide financial compensation on the principle of restoring the insured to the same financial state he/she enjoyed before the loss.

INSOLVENCY
Is when a business is no longer in a position to service and pay its debts and liabilities.

INSURANCE BROKER (see also BROKER)
An insurance broker acts on behalf of the insured and searches the insurance market for coverage appropriate to his clients. They work on a commission basis.

INSURABLE INTEREST
Insurable interest is the interest a person has in an object and is so related to it that he will suffer from any loss or damage to it. Insurable interest is fundamental to the validity of any insurance policy

INSURABLE RISK
Risks which lead to a definite loss which is fortuitous but have not yet occurred.

INSURANCE
A tool by which losses are made more affordable by pooling the risks of many individuals and business entities. Thus risks are transferred to an insurance company for a premium.

INSURANCE AGENT (see also AGENT)
An insurance agent gives insurance cover on behalf of an insurer.

INSURANCE POOL
A number of insurance companies that pool assets with the aim of providing cover beyond what individual insurers can offer mostly because of higher risks and liabilities.

INTERMEDIARY
(see Insurance Agent)

INVESTMENT INCOME
Income generated by the investment of assets.

LAW OF LARGE NUMBERS
Theory of probability which provides the premise for insurance business. Briefly, it states that the higher the amount of units insured, the easier it is to assess predictability.

LIABILITY INSURANCE
Covers the insured by paying out any sums for which he may become liable to third parties by reason of his negligence.

LIFE ANNUITY
Life annuity is a contract that guarantees periodic payments throughout a defined period (generally a lifetime) of a beneficiary – the annuitant.

LIFE INSURANCE
Insurance cover protecting beneficiaries after the death of an insured person.

LIMITS
Limits refer to the ceiling of benefits payable under the policy.

LLOYD’S OF LONDON
Originally, Lloyd’s was a London coffee house in the 1600s patronized by shipowners who insured each other’s hulls and cargoes. Today this is a famous marketplace where underwriting syndicates sell insurance policies and reinsurance. Lloyd’s market is a significant player in the international reinsurance market as well as a primary market for marine insurance and large risks.

LOSS
Refers to the decrease in the quality and/or value of an asset or liability.

LOSS ADJUSTMENT EXPENSES
The expense incurred by insurers in investigating and settling claims including court expenses.

LOSS COSTS
The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.

LOSS OF USE
Value pertinent to extra expenses incurred in having to rent a replacement car.

LOSS RATIO
Ratio between premia received by insurer and paid claims.

LOSS RESERVES
A general estimate of foreseen expenses related to claims.

MARINE INSURANCE
Insurance coverage related to goods in transit and their commercial means be it on water or on land.

MATURITY DATE
Is the date when an insurance benefit is due to be paid.

MISREPRESENTATION
An untruthful and/or misleading statement.

MORBIDITY RATE
The rate of occurrence of accident, sickness or injury within a specific group of people.

MORTALITY RATE*
A percentage rate of the occurrence of deaths within a specific group of people. Life insurance premia are usually determined by the mortality rate.

MOTOR INSURANCE POLICY
An insurance policy on a motor vehicle which has to cover the liability of a motorist and optionally own damage or first insurance.

MOTOR INSURANCE PREMIUM
The price an insurance company charges for coverage, based on the assessment of potential accidents, risks of theft and other losses. Prices vary according to insurers.
Premia also vary depending on the amount and type of coverage purchased; the make and model of the car; the insured’s driving record and driver’s age.

NAMED PERIL
The specified peril in an insurance cover against which the policy offers cover. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.

NO-FAULT
No-fault liability refers to specific legal regimes which attribute liability irrespective of fault.

NOTICE OF LOSS
Most policies require the insured to gove written notice of a loss promptly or within a specified number of days after that loss.

ORIGINAL EQUIPMENT MANUFACTURER PARTS / OEM
Motor vehicle parts made by the original manufacturer of an insured vehicle. (see also Generic parts)

PAID-UP POLICY
A fully-paid policy which requires no further payments to provide coverage.

PERIL
The specific cause of a possible loss such as fire, flood or theft.

PERSONAL LINES
Personalised property/casualty insurance products that are designed for and bought by individuals, including homeowners and motor insurance policies.

POLICY
A written document with legal bearing issued by an insurer to the insured stating the details of the contract.

PRE-EXISTING CONDITION
In health insurance it refers to a condition or an injury which pre-existed prior to the date of policy.

PREMIUM
The price of an insurance policy.

PRODUCT LIABILITY
Is the liability of a manufacturer or distributor of a product for damages caused by a defective product. In many legislations, this has become a no-fault liability.

PRODUCT LIABILITY INSURANCE
Is an insurance cover that protects manufacturers’ and distributors’ exposure to liabilities and claims by parties who have suffered damages through the use of the product.

PROFESSIONAL INDEMNITY INSURANCE
Covers professionals for negligence and errors or omissions that may cause harm or damage to their clients.

PROOF OF LOSS
Any document presented to an insurance company to prove damage or loss.

RATING AGENCIES
Agencies that vet and determine the financial strength and viability of financial institutions, including insurers.

REINSTATEMENT
To provide financial compensation so that the injured party is placed in the same financial position in which he stood prior to the damage.

REINSURANCE
Term referring to insurance cover bought by an insurer to transfer part or all the risk to the reinsurer.

REPLACEMENT COST
The cost of substituting a damaged object with another of the same kind.

RETENTION
Refers to the risk retained by an insurance company that is not reinsured.

RETIREMENT SCHEME
Scheme that provides a cash benefit or annuity payable to the beneficiary after retirement, permanent invalidity or death.

RIDER
See endorsement.

RISK
The chance of loss or the person or entity that is insured.

RISK MANAGEMENT
Strategic management of an insured’s varied risks. Risk management includes analysis of exposure to risk, a controlling, reduction or elimination of risk and the creation of safety provisions such as taking necessary measures, buying insurance and self-insurance.

SALVAGE
In return for compensation in respect of a damaged property, such as badly damaged vehicles, the injured party surrenders that property, otherwise known as salvage, to the insurer.

SCHEDULE
This is an attachment to a policy that specifies the details of the risk covered by that policy.

SELF-INSURANCE
Self-insurance is the concept of assuming a financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer in respect of the excess or the deductible.

SINGLE PREMIUM POLICIES
Policies paid for only once. These are policies bought by one single payment.

SOLVENCY
Insurers or insurance companies’ ability to pay the claims of customers and clients.

SPREAD OF RISK
Insurance sold in multiple areas to multiple policyholders so as the danger that all policyholders suffer losses at the same time is minimized.

SUBROGATION
The legal process by which after indemnifying the customer or client the insurer assumes the rights and remedial actions that the insured is entitled to in order to minimize or recover damage or loss.

SURRENDER CHARGE
Refers to a charge for withdrawals from or cancellation of an insurance contract.

SURVEYOR (also known as Adjuster)
A surveyor, or adjuster, is employed by a insurers to evaluate losses and, in some cases, settle policyholder claims.

TERRORISM COVER
Since September 11, 2001, most insurers have either removed terrorism coverage or raised its coverage price substantially.

THIRD-PARTY COVER
Refers to liability coverage bought by the policyholder as a protection against possible damages claimed by a third party. The first and second parties of an insurance contract are the insured and the insurer respectively.

TORT
Tort is a civil breach of duty which causes damages to another. The injured party has the right to recover those damages from the wrongdoer.

TOTAL LOSS
The condition of an insured object or property when damage is so extensive that repair would be beyond financial viability as costs would exceed the value of the vehicle or property.

TRAVEL INSURANCE
Insurance covering travel related risks usually including cancellations, medical emergencies and luggage damages.

UNDERWRITING
Term referring to the activity of examining, accepting, or rejecting insurance risks in order to conduct insurance business.

UNDERWRITING INCOME
Refers to profits made by insurers on sales after all expenses and losses have been paid.

UNEARNED PREMIUM
Refers to the portion of a premium already received by the insurer for which protection has not yet been provided.

UNINSURABLE RISK
These risks are typically difficult for someone to get insurance for.

WORKERS COMPENSATION
Is when insurance pays out benefits to injured workers to help replace lost wages while they are unable to work or medical expenses.

WRITE
To accept an application for insurance.