The Bhutanese Leading the way.
This paper in May 2023 had done a story on how a group of people led by a man named Leki was committing insurance fraud by pushing scrap vehicles off a cliff and claiming huge insurance amounts.
The ACC has now investigated the case. The ACC said that sometime in July 2022, RICBL reported to the ACC a case of suspected fraud in auto insurance claims upon observing several red flags and anomalous patterns. The claim raised suspicion when scrutiny showed that drivers involved in the so-called ‘accident’ were never injured despite vehicles falling off from the same spot more than once and the slim time gap between the date on which total loss claim was settled by one insurance company and date on which a new insurance policy was subsequently purchased from another insurance company.
The ACC investigated circumstances surrounding the auto insurance claims raised by Leki against five heavy vehicles and one excavator between 2020 and 2022. The investigation revealed that the 32-year-old Leki and his accomplices along with a few freelance, his wife Dechen and a former religious teacher Lam Kinzang were engaged in fraudulent motor insurance claims from the two insurance companies by staging accidents.
The modus operandi started with purchasing salvages of the vehicles declared and settled as total loss from one insurance company. It basically means that the insurance company did not see merit in repairing these damaged vehicles as their repair and service cost would be more than 75% of its sum insured. They purchased this salvage at an auction at residual value.
Few months later, these vehicles, while still lying in a junkyard in scrap or off-road condition, were insured with another insurance company under a comprehensive motor insurance scheme at a highly inflated sum assured value purporting the vehicles to be new and in good condition. After purchasing the policy, they ferried the scrap loading on another vehicle, usually a trailer, sometimes even accompanied by Backhoe loader and taken to a spot and pushed off the cliff before reporting the accident to the RBP.
The investigation revealed that an employee in one of the insurance companies underwriting the policies had received an illicit financial gratification from the accused in varying sums aggregating close to Nu. 100,000 between February 2021 and January 2022.
He skipped the company’s prerequisite steps in underwriting auto insurance i.e. physical inspection of the vehicles and other documentation process. In a few cases, he even falsely made it appear in the computer records that he only processed the policies underwritten by the company’s agents when he actually did it himself.
By staging nine accidents using six second-hand vehicles, the accused ripped off Nu. 19.734 million from the two insurance companies (RICBL and BIL) in claim settlement.
The ACC found that the fraud was not just a random case of infrequent opportunistic behaviour but an execution of premeditated operation of a fraudulent business model motivated by desire to make hefty profit effortlessly that would have perpetuated if not reported to ACC and subsequently investigated.
In order to share its investigation findings on systemic lapses and persuade relevant agencies to consider appropriate interventions, the Commission convened a joint meeting with the RMA, CEOs of the two insurance companies (RICBL and BIL) and RSTA on 17 February 2023.
The investigation helped the ACC in identifying eight key risk areas and formally issued 19 recommendations and advisories for their perusal and appropriate remedial actions. Under the RMA’s stewardship, the two insurance companies are collaborating on data integration leveraging on the existing platform CRST which would enable them to exercise enhanced due diligence in the auto insurance underwriting process and curtail recurrence of similar fraud risks.
ACC said the information silos with limited business intelligence, overriding of established due diligence processes and ethical issues of employees magnify the risk of fraud and corruption in the corporate sector.
