It just happened that Insurance companies are my least favorite type of audit that I would like to participate in ! Having said that the following is my answer :
Claims fraud is a major risk risk in insurance companies ,this could take two forms:
- claims being submitted when an insurable event has not occurred
- inflated claims being submitted for genuine events
The internal auditors need to focus their attention to :
- The claim department employes highly experienced ,honest and objective specialists
- There are sufficient and effective policies and procedures in place
- Segregation of duties and responsibilities relating to claims processing /approval and payment is practiced
- Fraud red flags are identified at an early stage
- proper invistigations are undertaken on timely basis
- A claims register is maintained and is accurate and up to date
- Outstanding loss reserves are adequate at any point of time
-Proper monitoring system is in place to record accumulation of claims
arising from a particular event or within a particular period
-Estimates of preliminary loss reserves are reasonable, regularly reviewed
and updated upon receipt of fresh and relevant information
The list could go and on ,with the limited time I have I will strict my answer to the above.
Sources: Lauban financial service Authority, Barclay Simpsons 's introduction to internal audit in insurance companies.
