Allianz Malaysia calls for harsher penalties to tackle widespread motor insurance fraud

ALLIANZ Malaysia Bhd has called on the authorities to introduce stronger penalties and clearer regulations to curb motor insurance fraud, which continues to drain the industry of approximately RM1 billion annually. The company's Chief Executive Officer, Sean Wang, stressed that current legal provisions addressing fraud and misconduct fall short when it comes to dealing with the tactics employed by unscrupulous tow truck operators and workshops.
Wang highlighted that while existing laws indirectly touch on fraudulent practices, they do not adequately address the scale and complexity of the issue. According to FMT, he estimated that around 10% of the industry's RM10 billion total annual motor claims are lost to inflated or manipulated claims.
He pointed to a deeply entrenched network of touts, tow truck operators, and complicit workshops who have long operated by inflating repair costs. These claims are often exaggerated by 15% to 20%, resulting in substantial financial losses for insurers. Touts are known to patrol busy urban areas, especially on motorcycles, and race to accident scenes where they quickly offer towing services under the guise of being affiliated with insurance providers.
Once a vehicle is in their hands, these operators typically delay informing insurers and may hold onto vehicles for days or even weeks while negotiating with workshops willing to overcharge for repairs. In some cases, substandard parts are used or unnecessary work is performed to justify higher claim amounts. According to Wang, this practice has persisted for more than 40 years, misleading policyholders into believing their insurance provider is handling the repairs when in fact, the vehicle is in the custody of unverified agents.
To address the issue, Wang advocated for greater industry oversight, the introduction of strict punitive measures against perpetrators, and increased transparency within the towing and automotive service sectors. He believes these steps are crucial to protect both insurers and policyholders from systemic exploitation.
Efforts are already underway to curb these activities. Bank Negara Malaysia, which regulates the insurance sector, has implemented initiatives requiring insurers to offer direct towing services and contact options for clients involved in accidents. Insurers now have the choice to invest in their own fleet of tow trucks or engage verified third-party providers.
Additionally, there are discussions about introducing electronic police reporting, which could reduce reliance on intermediaries who often offer to handle such paperwork as part of their exploitative services.
Allianz Malaysia has responded proactively by establishing the Allianz Road Rangers, a nationwide network operating over 300 tow trucks to provide emergency assistance. The company has also strengthened its claims management system and blacklisted workshops and operators found engaging in unethical or fraudulent practices.
Education remains a crucial tool in the fight against insurance fraud. Wang emphasised the importance of policyholders contacting their insurance provider directly following an accident.
He warned that agreements signed hastily under duress at the accident scene could result in individuals unknowingly relinquishing their rights.
Wang concluded that while the trauma of an accident often makes decision-making difficult, immediate communication with one's insurer is vital to ensure the proper and safe handling of claims. The industry, he said, must continue to evolve its strategy not only through regulatory support but also by equipping consumers with the knowledge they need to protect themselves.

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