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Insurance fraud has been identified as a significant risk that undermines investor and customer trust. This chapter examines the effect of insurance fraud on the financial performance of the insurance industry of Tanzania. A standardized questionnaire was used to conduct a survey of 119 insurance companies and brokers. The data were analyzed using the multiple regression technique. The findings reveal that policyholder fraud, internal fraud, and intermediary fraud have a negative effect on the financial performance of insurance companies and brokers. Fraudulent documents, customers demanding significant compensation relative to the actual damage, a fake accident, weak internal control, employee dishonesty, poor staff compensation, ineffective supervision, and the inability to detect fraud were the causes of insurance fraud. In order to reduce insurance frauds, it is suggested to (1) thoroughly evaluate claims, (2) establish a transparent anti-fraud bureau, (3) use information technology for effective internal audit, and (4) implement a comprehensive internal fraud policy. |
