Insurance Fraud in Nigeria – What to Watch Out For

What Is Insurance Fraud?

Insurance fraud means any deliberate dishonest behavior with insurance to get money or advantage illegally. It can be done by:

• Policyholders (you or someone insured)

• Agents or brokers

• Insurers themselves

The fraud might be trying to get money for damage that didn’t happen, exaggerating losses, submitting fake documents, or using unlicensed insurers.

Related Terms to Know

• False Claim / Forgery: Submitting fake or altered documents to get a payout.

• Exaggerated Claim: Real event, but losses are exaggerated to get more money.

• Premium Diversion: Agent takes your premiums but doesn’t send them to the insurer.

• Fake Certificate: Documents showing you have insurance when you do not.

• Unlicensed Underwriting: Someone offers or writes insurance policies without legal license.

• Staged Loss: Deliberately creating damage (e.g. fake car accident, arson).

Why Insurance Fraud Happens in Nigeria

Understanding why fraud happens helps you understand what to watch out for.

Lack of Awareness and Education

Many people do not know how insurance works: what a valid policy is, what licensing means, what exclusions are. Fraudsters exploit this.

Poverty and Pressure for Cheap Premiums

Some people try to save money and are tempted by very cheap policies. Scammers offer low prices to lure them, then fail to provide real service.

Weak Enforcement & Regulatory Gaps

While there are laws and bodies like NAICOM, sometimes enforcement is weak. Some firms or agents act illegally with little punishment until caught.

Corruption or Dishonesty Within the System

Sometimes agents or brokers mislead customers. There are cases of forgery, altering documents, misrepresenting coverage.

Complex Policies, Fine Print & Hard‑to‑Read Terms

Insurance documents often have legal words, many pages. People may sign without reading carefully, so fraudsters hide bad terms or make misleading statements.

Legal Framework: Laws & Bodies Fighting Insurance Fraud

Knowing what laws and bodies exist helps you fight fraud.

NAICOM – National Insurance Commission

• The main regulator for all insurance business in Nigeria. It licenses companies, agents, brokers. Issued warnings about fake third‑party motor insurance, unlicensed operators (e.g. the case with NCIS).

• NAICOM acts under the NAICOM Act 1997 and Insurance Act 2003.

Relevant Laws & Penalties

• Insurance Act (various versions): Regulates licensing, minimum capital, operations.

• NAICOM Act: Gives NAICOM power to inspect, sanction, cancel licenses.

• Other laws relevant: Consumer Protection, Fraud Acts, Anti‑Money Laundering laws.

Other Regulatory Bodies & Enforcement

• EFCC (Economic and Financial Crimes Commission): Handles major financial fraud.

• ICPC (Independent Corrupt Practices & Other Related Offences Commission).

• Police, state consumer protection agencies.

NAICOM sometimes works with the Federal Capital Territory Administration (FCTA), Road Transport Service (DRTS), Federal Road Safety Corps (FRSC) to enforce valid motor insurance.

Common Insurance Fraud Schemes in Nigeria

Here are some of the frequent types of fraud in Nigerian insurance. Knowing them helps you spot them.

Scheme 1: Fake Third‑Party Motor Insurance Certificates

• Agents or cooperative societies issue certificates that look real but come from unlicensed or illegal insurers.

• Example: NCIS claimed to sell motor third‑party insurance, but NAICOM said NCIS is unlicensed for compulsory third‑party.

Scheme 2: Premium Diversion by Agents or Brokers

• An agent collects premium from you but does not remit it to the insurer. You believe you are insured, but when claim happens, there is no record.

• Example: In 2017, an agent from Mutual Benefits collected N120,000 for a comprehensive motor policy, gave a forged receipt and certificate, but did not pay the premium.

Scheme 3: Exaggerated or False Claims

• Real damage or real accident is overstated: you exaggerate how much something cost, list items that weren’t lost, make damage look worse.

• Or claim accident or theft when none happened.

• Fraud in property insurance: staged burglary, staged fire, theft when no burglary, etc.

Scheme 4: Staged Accidents or False Injury Claims

• People deliberately cause minor accidents (or stage them) to collect from insurance companies.

• Or claim bodily injury even if none happened.

• High cost repairs or fake injuries submitted for compensation.

Scheme 5: Fraud in Health Insurance / Medical Claim

• Claims for medical services not done, or inflated bills, false diagnostic test results.

• Forged prescriptions, overbilling.

• Health facilities colluding with patients or brokers to submit fake claims.

Scheme 6: Use of Unlicensed Insurers or Unlicensed Classes

• Companies or individuals present themselves as insurers or cooperative insurance societies, selling policies they are not allowed to sell (e.g. third‑party motor insurance).

• Policyholders buy thinking they are dealing with licensed companies, but they are not.

Scheme 7: Forged Documents & Certificates

• Forged policy documents, fake insurance certificate, false agent stamp.

• Documents with incorrect details, fake logos or license numbers.

Scheme 8: Fraud by Insurers or Internal Fraud

• In some cases, insurance companies or staff may delay claim payments unfairly or underpay.

• Sometimes internal collusion to reject valid claims, or inflate repair cost and share kickbacks.

Scheme 9: Identity Theft or False Nominee Claims

• Someone uses another person’s identity (or documents) to purchase policy or file claim on someone else.

• False beneficiaries in life insurance.

Scheme 10: Misleading Premium or Coverage Promise

• Selling a policy under false promise: false cover levels, telling people they have full comprehensive cover when they only have third‑party or limited cover.

• Hidden exclusions unmentioned.

How to Detect & Watch Out for Fraud in Insurance

What signs to watch for when buying insurance or when someone presents an insurance document to you.

Red Flags When Buying or Checking Policies

1. Check License & NAICOM Registration: Always verify insurer/agent/broker is listed by NAICOM. For motor third‑party policies, ensure insurer is authorized.

2. Certificate Verification: Use NIID (Nigerian Insurance Industry Database) for motor third‐party certificates. If you give policy number to the insurer and they say they can’t find it, something is wrong.

3. Too Low Premiums or Offers: If someone offers premiums way below market averages, ask why. Is coverage less? Is agent licensed?

4. Lack of Proper Documentation: No official address, no registration number, no proper receipt, fake or no company website.

5. Payment Methods Unusual: Cash to personal accounts, untraceable payments, no receipt.

6. Misleading Names or False Claims: Agent says “we are licensed” but cannot show license; cooperative society claiming to underwrite policies they are not licensed for.

7. Unclear or Hidden Exclusions: Ask, “Is flood covered?”, “Is theft covered?”, “What about excessive delivery time for claim?”, etc.

8. Delayed or No Response after purchase or when making claim. If agent/company disappears or is hard to reach.

Things to Ask Before Buying

• What is your license number and permit details?

• Which classes of insurance are you licensed to underwrite/sell?

• What is the policy document look like? See sample.

• Can I verify this policy with the insurer or regulator?

• What is your address, physical location, official contact info?

• Ask for receipts and contract, not just verbal promises.

Verifying Realness After Buying

• After you pay, verify certificate online or through insurer.

• Keep record of payment, receipt, policy documents.

• If you renew, check the renewal document matches coverage promised.

How Ordinary Nigerians Can Protect Themselves Against Insurance Fraud

These are practices you can follow to avoid being a victim.

Step 1: Use Licensed Companies and Agents

• Only purchase from insurance companies listed by NAICOM.

• Ask agent for proof of agent license.

• Use official offices or website of insurer.

Step 2: Insist on Proper Receipts, Certificates, and Documentation

• After you pay, ask for written contract or policy document.

• See the certificate, read it.

• Keep receipts and any proof you paid.

Step 3: Verify Motor Third‑Party Insurance Certificates

• For motor insurance, certificates are compulsory. Use NIID or NAICOM’s lists to verify.

• Ask if policy is on the NIID or database.

Step 4: Avoid Paying Premiums in Cash to Unknown Persons

• Use bank transfers to insurer’s verified account, not personal accounts.

• Get official receipts; verify receipt numbers.

Step 5: Read Policy Terms, Conditions, Exclusions

• Don’t rush through. Take time to read; ask questions.

• Ask specifically about what is excluded (flood, fire, etc.).

• Understand what deductible or “excess” you must pay.

Step 6: Keep Records of Everything

• Document conversations with agents (dates, names).

• Take pictures of certificate, documents.

• Store copies of policy documents, receipts.

Step 7: Report Suspicious Behavior

• If you suspect agent or company is fake, report to NAICOM.

• Also report to police if fraud is committed.

• Inform others: through social media, community, warn friends.

Step 8: Insist on Validation

• Ask insurer directly for confirmation once you buy policy.

• For example, call insurer’s official customer care line, check policy number, check NIID listing, check if insurer’s name matches.

Consequences: What Happens When Fraud is Discovered (for Fraudsters and Victims)

There are serious consequences for those who commit fraud, and also for those who unknowingly buy fake policies.

What happens to Fraudsters & Unlicensed Insurers

• NAICOM can revoke licences, impose fines, order legal actions, refer to EFCC or ICPC for prosecution.

• Criminal charges possible for forgery, deception.

• Confiscation of fraudulent gains.

• Public warnings, blacklisting.

What happens to Victims

• Loss of the money paid as premium, no protection when needed.

• In motor cases, fines or penalties by road safety or police.

• In case of accidents, victim may have to pay damages themselves because certificate invalid.

• Emotional stress, time waste, loss of trust.

How Insurance Fraud Hurts Everyone

• Premiums rise for everyone as insurers cover losses from fraud.

• Insurer trusts less, requires more documentation or higher deductibles, making insurance costlier or harder.

• Less confidence in insurance sector overall.

Comparison: Fraud in Motor vs Health vs Property vs Life Insurance

Fraud looks different in different types. This comparison helps you know what to watch in what type.

Real‑Life Examples: Cases of Insurance Fraud in Nigeria

Below are real or reported cases that illustrate how insurance fraud happens, and what lessons we can learn.

H3 Example 1: NCIS and Third‑Party Motor Insurance

• NCIS (National Cooperative Insurance Society) claimed to issue valid third‑party motor insurance certificates. But NAICOM said NCIS is not licensed to underwrite compulsory third‑party motor insurance. so policies from NCIS are illegal.

• This case shows you must verify that company is licensed for the class of insurance you buy.

Example 2: Agent Forgery in Motor Policy (Mutual Benefits Case)

• In Lagos, a marketer for Mutual Benefits collected N120,000 from a customer for a comprehensive motor insurance policy, gave a forged receipt and certificate, but did not pay the premium to insurer. When customer tried to verify, discovered fraud.

• Shows agents could forge documents; always verify with insurer directly.

Example 3: Exaggerated Claims or Staged Loss

• According to “Five most common examples of insurance fraud in Nigeria”, there are staged home fires, staged thefts, and exaggerated losses in property and motor insurance.

• These illustrate that not all claims are honest ones; evidence is key.

Example 4: Bank Fraud Linked to Insurance

• In 2018, insurers paid over N350 million in claims allegedly due to frauds perpetrated by bank staff or fraudsters targeting banks. For example, companies misrepresenting losses.

Summary Table Before Conclusion

Conclusion

Insurance fraud in Nigeria is a serious risk that affects many. But with knowledge and care, you can avoid being a victim. Key lessons:

• Always verify the company, the agent, the certificate via NAICOM or NIID.

• Be suspicious of deals that seem too cheap, agents who take cash with no receipts.

• Make sure documents, receipts, policy paperwork are complete and real.

• Understand the laws and your rights.

When you take these steps, you protect your money, your legal safety, and ensure that if something bad happens, your insurance will actually help. Insurance should give peace of mind—but only if it is real and you are careful.