Government loses US$5,4 million to vehicle insurance scam
GOVERNMENT is losing US$5,4 million annually to vehicle insurance scammers preying on two thirds of the country’s private and public passenger vehicles, it has been established.
As a result, a mere one third of Zimbabwe’s half a million vehicle population have genuine insurance cover.
While the innocent victims suffer as the cunning insurance fraudsters line their pockets, government continues to dawdle on formulating policies meant to close the loopholes.
In a statement to the National Assembly, Transport and Infrastructural Development Minister, Joram Gumbo, said the situation has become so bad that the Traffic Safety Council of Zimbabwe (TSCZ) last year collected only US$2,6 million out of the US$8 million it should get from the 12 percent insurance levy.
As such, TSCZ was failing to conduct its awareness and educational functions, a situation which has been partly blamed for the surge in fatal road traffic accidents.
Investigations have exposed well-oiled insurance rings that are duping tens of thousands of motorists as well as starving the national coffers of much-needed revenue.
It has emerged that most of the fraudsters work closely with some insurance companies, or some bosses of these companies, by using parallel systems and counterfeit insurance cover notes that are not captured by the companies.
Because it is mandatory for every car to be insured in Zimbabwe, many motorists fall prey to these tricksters because they will just be seeking to avoid being fined for not having any insurance cover, which normally comes in two categories – third party and comprehensive that help repair or replace vehicles in the event of road traffic accidents.
Public passenger vehicles such as buses, taxis and urban commuter omnibuses must also have passenger insurance which helps cater for injured crash victims. But that has largely not been the case since many victims have failed to access required medication after an accident.
The situation is further compounded by insurance touts who have flooded the market purporting to be brokers for reputable insurance firms, when in fact they would be fraudsters.
Many motorists and public transport operators have, resultantly, failed to access cover in the event of accidents.
Gumbo opened the pandora’s box on Thursday last week when he told Parliament that TSCZ operations have been hamstrung by a crippling financial situation arising from non-remittance of the insurance levy and was thus failing to carry out its traffic safety awareness programmes.
In addition to that, injured crash survivors keep languishing in hospitals as they fail to raise required fees or buy equipment needed to avoid permanent road traffic accident induced disabilities.
Insurance companies are mandated by provisions of the Road Traffic Act to medically assist injured road carnage survivors and bear costs for those who would require psychological counselling.
But the glaring misdeeds dogging the insurance sector have worked to deny them that fundamental right.
They are left with no choice, but to fund their own medication and many end up in understaffed government hospitals that lack proper medical equipment.
To signify how costly this vehicle insurance scam has been, many crash survivors from around the country wind up at Parirenyatwa Hospital, the country’s largest referral hospital, where they would be detained for long periods of time without proper care because the casualty section is crumbling.
Patients with broken limbs and arms suffer the most due to a shortage of surgical drills that forces doctors to use inferior material to which the patients take more time to respond.
The Financial Gazette has learnt that a consignment of preferred drills sourced by government from the United States in 2014 is yet to arrive in the country.
Among some of these unfortunate accident victims is a 42-year-old man, who has been in hospital for more than three months.
He was injured in a commuter omnibus accident in Masvingo, late last year, and was transferred to Parirenyatwa due to the severity of the fractures he suffered on both legs.
And doctors fear his legs might be amputated.
Brain Packeth, an orthopaedist at the hospital, said under normal circumstances, it takes only three days to discharge a patient in his condition.
“We are wasting his time here. Using inferior material is risky. His legs could be permanently disfigured as a result of that. We need to use proper implants. The other option is to buy the sign nails (used to fix the femur and tibia bones) and the surgical drills, but we do not have them here and the patients cannot afford the high costs at private hospitals,” said the doctor.
Renowned orthopaedist, George Vera, who is also a TSCZ board member, said: “We are praying that we do not have another accident with the magnitude of the Kwekwe bus disaster anytime soon, because we would have no space to put the people in. It’s a very terrifying situation.”
He was referring to the horrific accident involving a Pfochez bus which side swapped a Mercedes Benz Sprinter omnibus leading to 30 deaths two weeks ago.
Those who suffered serious injuries were transferred to Parirenyatwa, resulting in wards there quickly filling up.
Another doctor at the hospital said: “I have worked here for the last five years and I am yet to see any insurance company paying for accident victims’ bills.”
Motorists and public transport operators have also been criticised for preferring the easier and cheaper insurance cover that would fail to protect them in the case of accidents.
TSCZ and police are now encouraging public transport users to check vehicles for valid insurance cover notes before boarding, but with little ability to distinguish between fake and genuine cover notes, the public is highly susceptible to the cunning deception of fraudsters.
Chairman of the Insurance Council of Zimbabwe (ICOZ)’s public relations committee, Lovemore Madavo, described the situation as tragic but disowned insurance touts.
“The tragedy is that there are people operating from under trees and they are not registered. We represent registered insurance companies and as ICOZ, we do not allow our members to use touts. This is a scourge which should be dealt with by law enforcement agents. We cannot go ourselves and physically remove them. They do not officially represent our members,” he said.
He also encouraged motorists and transport operators to report to the council if they have any queries.
“A lot of these people are not honest. They go and purchase insurances under trees from people who sell counterfeit cover notes,” Madavo charged.
Deputy Transport Minister, Michael Madanha, said government was worried by the continued abuse of the motoring public by insurance fraudsters and was working closely with stakeholders to end the scourge.
“When an accident happens, very few insurance companies own up. There seems to be no action to take care of post-crash victims; once the accident has happened, no one knows what’s going to happen to the injured who will have to pay for their medical bills,” he said in an interview.
“The whole thing points to a situation whereby we need to look for a more viable solution. As government, we really need to know what insurance companies are doing with the money that people pay and that is why we have said we want everyone to be connected through an electronic system, which allows authorities to keep them in check as well as eliminate bogus insurance policy brokers,” Madanha pointed out.
He argued that electronic insurance cover notes would get insurance companies connected to a database which comprises key stakeholders such as the Zimbabwe National Roads Administration, the Central Vehicle Registry and the Vehicle Inspection Department.
This plan has, however, been in the pipeline for years and has been spoken of by a succession of transport ministers without anything tangible coming out of it. Still, acting TSCZ managing director, Clifford Gobo, believes it is the way to go.
“There is need for an inclusive, all-stakeholders approach whereby we are going to go electronic and flush out these fraudulent elements that have proliferated within the vehicle insurance sector. These people are disadvantaging everyone — the TSCZ, government, insurance companies and the motorists. We believe this system will totally eliminate them,” he said.
In the wake of the troubles injured accident survivors go through, as they seek to make use of their insurance policies, government also has planned to legislate a public levy to establish a road accidents fund, which would eliminate the third party insurance policies on which fraudsters thrive.
But the plan, which only becomes a major talking point once a major road accident takes place and fizzles out in between, has met hostility from members of the public who feel they are too overburdened by taxes to take another.
“They want me to pay for someone’s negligent driving,” fumed a colleague after Gumbo raised the issue again following the Kwekwe bus disaster.
Much of the skepticism arises from the commonly shared perception that, like other public funds, government bureaucrats would feast on the road accident fund.
Part of the fund would also go towards awareness campaigns.
According to the proposed document seen by the Financial Gazette, the fund would be collected through compulsory contributions from vehicle owners to cover victims of traffic accidents.
Stakeholders have criticised the proposed fund, which borrows heavily from the South African model, for being out-dated in concept and containing a serious common cost phenomenon.
Few other countries in the world, notably Indonesia, India the US, have publicly administered road accident funds.
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