What was "Insurance profiteering"?

Aug 12, 2020

1. Creating a fake scene        

Making a fake site could also be like pretending goods to be stolen, the lock of the warehouse door was broken; seal and the roof were removed; self-burning warehouse after dispersing assets; replacing goods or vehicles damaged but not covered by insurance with goods or vehicles participating in insurance to make a scheme to streamline the case file, such as fraudulently exchanging the license plate of the car not participating in insurance but having an accident with a license plate of the vehicle that was insured but not having any accident; self-inflicted injuries such as the case of a hand and foot handcuff nearly 4 years ago, the young woman told the police that due to sad family matter while  wandering she was sucked into by the train. When the train crushed her hand and foot, a young man passed by, being asked for help and she escaped from death. However, the police determined that the two people knew each other before, she bought three life insurance packages, devising a way to harm her body, discussing with the familiar young man and asking him for money to cut her hand and foot to request life insurance company to pay nearly VND 3 billion.

2. Lost occurred before the signing of insurance contract      

The property had been lost before the insurance buyer signed the insurance contract so as to be compensated. For example, the goods had been lost, then the goods owner bought insurance and often shook “dirty hands" with bad people in the insurance enterprise to record the date of entering into an insurance contract before the date of occurrence of the loss of goods so that the insurance contract was legally valid. Rather, this insurance contract was null and void because the insurance event had occurred, the subject matter insured (goods) no longer existed (Article 22, the 2010 Law on Insurance Business).

3. Declaring an increase in the value of loss

This was usually done by taking advantage of the loss to cause additional damage to the insured property in order to receive higher compensation, or damage the entire insured property to be covered with the property having a greater value. Another way was that for small loss which should not have been covered, the above level of deductible could be made so as to be compensated. For example, the contract of insurance for goods carriaged by sea of wheat bran pellets stipulated that the deductible was 0.5% of the weight of goods. In fact, the weight of goods was short of 0.45% which should not be compensated. The insured might make insurance profiteering by "finding ways" to raise this figure to above 0.5% so as to be covered.

4. Double insurance   

This was when the insurance buyer entered into insurance contracts with many insurance enterprises to insure the same subject-matter insured with the same terms and conditions of insurance so that when a loss covered by insurance  liability the insurance buyer was compensated for many times the value of the property. For example, a property of VND 5 billion was insured at 3 insurance enterprises with the insurance money of VND 5 billion each. When there was total loss, the three companies had to pay VND 15 billion while they should have compensated together a total of VND 5 billion only.

5. Deliberately causing damage to the subject matter insured   

Profiteering in this way was quite sophisticated, with a high knowledge of insurance, the rather big amount of money, difficult to investigate or to find out the truth cost a lot of effort and money. A fairly common way was to find ways to destroy property in a real life situation. For example, sinking ships when they saw bad weather, broken machines. Profiteers mastered insurance contracts to ensure risks were within the scope of insurance liability. Sometimes there was collusion with the "worms" in the insurance enterprises to increase the value of the property before participating in insurance or to replace expensive equipment of the property with "phony" items, then destroyed the property. Of course, the amount of compensation would be calculated for "genuine" items as when participating in insurance. This type of practice often happened with high value property, expensive equipment installed such as mobile hospitals and specialized vehicles.

6. Stating the date of occurrence of the insurance event within the period of the insurance contract 

The insurance contract had the period of insurance. When the insured event occurred, the insurance enterprise ought to pay the insurance money to the beneficiary or indemnify the assured. For example, a "Certificate of Motor Insurance" stated the "insurance period" was 24 months from 8:50 a.m. on 28/5/2018 to 8:50 a.m. on 28/5/2020. If the accident for motorcyclists occurred on 29/5/2020, the insurance profiteer would "direct" so that the accident happened before 8:50 a.m. on 28/5/2020.

7. Making fake documents   

This was a way of profiteering often having "insiders" who were not good, working at insurance enterprises and connecting with property repair lines (subject matter insured) such as means of transport, machines, equipment, etc. Although there were no actual losses, there were still valid documents and vouchers such as repair invoices, purchase of supplies and spare parts invoices with fully real signatures, seals, vouchers but only "the truth” is ... fake.

Insurance profiteering might be subject to administrative penalty; civil liability (insurance enterprise had the right to refuse insurance request, invalidate the contract, decline compensation; and criminal liability provided for in Article 213 (Crime of fraud in insurance business), Article 214 (Crime of fraud on social insurance, unemployment insurance) and Article 215 (Crime of fraud on health insurance) of the 2017 Penal Code taking effect from January 1, 2018.

(*) Lawyer Ngo Khac Le | VIAC Arbitrator.

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