Insurance sector best at managing fraud, misconduct

System to report suspicions of corporate fraud inadequate, survey finds

By: IE Staff
November 12, 2002 November 12, 2002
09:40

Canada’s insurance sector performed significantly better in managing fraud and misconduct than the rest of Corporate Canada, according to a survey conducted by KPMG Forensic.

The survey revealed that the insurance sector outperformed Corporate Canada in a number of key areas:

100% of insurance respondents said it was the responsibility of the chief financial officer and the head of internal audit, with lesser percentages assigned to the chief executive officer, the head of risk management, the head of security and the Board, this compares to 80% of corporate Canada that said responsibility lies either with the CEO or CFO;
100% of insurance respondents were satisfied or somewhat satisfied that their reward structure was adequately linked to performance, compared to 84% of respondents in Corporate Canada;
83% of insurance companies have a conflict of interest policy in place, compared to 73% of Corporate Canada; and
67% of insurance respondents require individuals to sign an annual conflict of interest policy, whereas only 29% of Corporate Canada respondents require this type of sign-off.

“The insurance sector got it right, but it should not by any means be considered grounds for complacency,” said Dave Thomson, Partner in KPMG’s insurance practice, in a news release. “Given their role in providing financial security to Canadians, insurance companies clearly take risk seriously by putting better governance practices in place, but more can be done.”

On sharing responsibility for fraud prevention and detection, Thomson said, “Behind the manipulation of financial statements, you’ll often find a conspiracy among the most senior officers of the corporation. Sharing responsibility for prevention and detection is a way to ensure checks and balances and speaks to the heart of preventing the most serious types of corporate fraud.”

The news is not all good for the insurance sector, however. While 55% of Corporate Canada respondents said that the communication channels for reporting suspicions of fraud in their organization need improvement, 67% of insurance sector respondents agreed with the same statement.