Analysis of the internal control setup within the insurance sector for combatting fraud, with an empirical analysis based on the Belgian insurance sector.

Abstract

Insurance fraud represents a minimum of 250 million euros annually. Every honestly insured household pays an average of 60 to 125 euros extra in insurance premiums, which ends up in the pockets of unscrupulous policyholders. This alarming figure has prompted the insurance sector to increasingly safeguard itself against this menace.

In the context of this thesis, I intend to address the following points:

An introduction to the insurance sector in general. Furthermore, I will delve deeper into the organization of insurance and the Belgium context and explain the regulators such as FINMA, which establishes minimum audit guidelines,

Then, a section on the fraud sector with various definitions, an analysis of the profile of fraudsters, and an analysis of the various known methods of internal and external insurance fraud. Examples include fraud schemes such as "property fraud," where individuals declare a loss on their property and others. I will also explore more innovative techniques used in insurance fraud, particularly those observed in Belgium, especially in Liège.

The most substantial part of the research will be dedicated to analyse the internal control in the insurance sector and exploring the various techniques that the insurance sector can employ to prevent fraud, including the innovative approaches witnessed in Belgium, especially in Liège. The objective will be to elucidate the entire process that insurance companies can implement to optimize risk, such as the establishment of internal audits. Several regulations are already in place such as the existence of the international standard ISAE 3402 (International Standard on Assurance Engagements 3402) or Solvency II directive. This standard enables service providers to demonstrate the existence and effectiveness of their internal control systems.

To conclude, in terms of methodology, I will research various well-known scandals, such as the 2021 floods in Belgium where many companies engaged in fraudulent activities. I will conduct interviews with reputable insurance companies and insurance brokers.