Causes, effects and deterrence of insurance fraud: evidence from Ghana

Abstract

Purpose This paper aims to measure 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. Design/methodology/approach Primary and secondary data obtained from 39 insurers in Ghana are used in this paper. A multiple regression model is used to determine the relationship between financial performance and insurance fraud variables. Findings 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, 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 found to be the major causes of insurance fraud in Ghana. To deter insurance fraud, effective internal fraud policy, rigorous assessment of insurance policies and claims, adequate training for independent brokers on insurance fraud and modern information technology tools are paramount in fighting this menace in Ghana. Research limitations/implications These findings are to have substantial impact 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. Originality/value The main value of this paper is the determination of the key variables that constitute insurance fraud and their impacts on the annual financial performance of insurance companies in Ghana.

Can Fraud Diamond Affect Fraud Financial Statement In Sharia Commercial Banks?

“…by the fraudsters with their own opinionated feelings or beliefs (Akomea-Frimpong et al, 2016) is found to be positively related to fraud among employees. Sunardi & Amin (2018) indicates that rationalization relates positively to employee fraud.…”

“…Likewise, Bonsu et al (2018) found weaker internal control, inadequate training and fraud policies as the major causes of fraud in the financial institutions in Ghana. Other studies affirm the assertion that internal control weaknesses can be major contributing factors for fraud to be committed (Akomea-Frimpong et al, 2016 andAsmah et al, 2020). According to Asmah et al (2020), inadequate controls in some areas of banks can fuel the commission of fraud among bank employees.…”

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“…Supervisory capacity should be better than that supervised, so the authorities need to add experienced employees in finance. According to Isaac, Charles, & Dei (2016) [17], adequate training for insurance marketers is one way to prevent insurance fraud.…”

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“…Therefore, the technology currently used should have or be equipped with strong security, because if it is used under certain conditions and with bad impetus by utilizing certain parties (Davis, 1989), then this will produce a conspiracy of users who have the motivation not good will be very detrimental to the organization. By preventing through inherent supervision of the use and use of information technology, corruption can be minimized and prevented (Tang 2018;Halbouni & Garbau;Akomea 2016;Quah;and Xin Li 2015;Bussell 2010;Shim & Eom 2009;and Bhatnagar 2003).…”