Monday, September 28, 2020

Fresh evidence suggests GIB was brought down by insurance fraud

An investigation by KPMG auditors has turned up information that gives weight to suggestions that General Insurance Botswana (GIB), which was liquidated last year, may have been a victim of Botswana’s massive insurance fraud.

GIB, Botswana’s first locally registered insurance company, was last year placed under provisional liquidation by the Registrar of Insurance following a court order issued by Justice Maruping Dibotelo.
An investigation by provisional liquidators, KPMG, has not found any instances of fraud by the company directors, Bright Nyirenda, Sophie Tsheole and Khan, but instead revealed that the company collapsed because motor vehicle claims made by clients were by far in excess of the contributions.
“When the company commenced operating in 2002, the initial reaction from the market, and particularly the established brokers, was relatively negative. As a result the company took on business that the other insurance companies did not want i.e. motor insurance, which contributed to 89% of their revenue. Due to the risky nature of motor insurance, reinsurers were reluctant to reinsure and would resort to increasing the threshold for the excess of loss claims, to amounts higher than what the company would normally claim from them,” states the report.

It emerges that “over time, it turned out that the claim payouts far exceeded the premiums earned (loss ratio were very high, sometimes as high as 120% of premiums earned). Reinsurers would limit their loss ability or loss payouts and in the end GIB had to fund the excess i.e. between the claim payouts and premiums received.”

“As a result of the above, it became increasingly difficult for the company to settle claim’s as and when they arose.”

About the same time, GIB was placed under liquidation. An anonymous whistle blower, who claimed to be an insider, spilled the beans on massive motor vehicle insurance fraud racket involving police officers, insurance clients, assessors and panel beaters. Claims of insurance fraud gained more credence when three Botswana Police Service Officers, a panel beater and a deputy sheriff were brought before Chief Magistrate, Lot Moroka, on allegations of insurance fraud.
Police officers Badisa Maswe of Gantsi Police Station, Moreetsi Sebako stationed in Broadhurst and Malebogo Kapo of Block 8 Police Camp are accused of conspiring with Tlhopho Ketshabile, a deputy Sheriff, and Louis Lorenzo, a panel beater, to defraud the Botswana Insurance Company Limited.

The case came hardly three weeks after the whistle blower, who claims that for four years he was “forced” to take part in the massive insurance fraud scam involving police officers, panel beaters and insurance assessors, spilled the beans on how the scam brought down General Insurance Botswana (GIB).

According to court records of the case involving the three police officers and a panel beater, the five accused on March 29 2007 conspired to defraud BICL by making a false claim that Land Rover Discovery B355 AEX and Jeep Cherokee B700 AII had been involved in a road accident and that the owners of the cars were entitled to a compensation when they knew this not to be true.

The particulars of the case followed the same modus operandi disclosed by the anonymous whistle blower in a letter to all local insurance companies detailing how insurance companies are being defrauded in the scam.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.