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

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.