Sialkot insurance fraud must not go unnoticed, unpunished
Tariq Khattak
Islamabad: Pakistan’s insurance sector is grappling with a deepening crisis of fraudulent claims that is steadily undermining the industry’s financial stability. Investigations and industry accounts reveal that organised networks are systematically targeting insurers by orchestrating fake claims, often through deliberately staged incidents such as factory fires.
The pattern, according to sector insiders, is alarmingly consistent. Owners of loss-making factories quietly remove machinery and valuable stock before setting fire to their facilities. Soon after, they filed multimillion-rupee claims with insurance companies. When insurers refuse to pay without proper verification, they are subjected to threats, orchestrated media trials, propaganda campaigns, and even pressure from government officials.
Industry sources point out that such cases are not isolated. Policies are often purchased from financially strong companies, which are later targeted for fabricated claims. A recent incident in Sialkot has further exposed the scale of this practice. During Eid holidays, a factory was deliberately set ablaze, yet the fire brigade did not arrive for four days. When the insurance company demanded evidence of the machinery and stock that had allegedly been destroyed, the factory owners responded with violence, attacking the company’s head office, while simultaneously launching a coordinated smear campaign on social media, insiders informed.
One of the country’s top five insurers, rated AA+ by two leading credit rating agencies, is now under sustained attack despite its track record of paying out billions of rupees annually in genuine claims. In one instance, the company’s decision to decline a suspicious claim led to a false complaint being lodged with the regulator, apparently as an attempt to pressure it.
This wave of fraudulent activity has serious consequences. Cash flow at several companies has been disrupted, leaving them struggling to meet payroll obligations and cover operational expenses. More worrying is the potential impact on ordinary policyholders, whose legitimate claims may be delayed or jeopardised as resources are diverted to contesting fraudulent demands.
The insurance industry is one of the country’s largest financial sectors, valued at approximately Rs 3,554 billion. Each year, insurers pay out around Rs 450 billion in claims and collect nearly Rs 675 billion in premiums. The sector supports an estimated 250,000 households, underscoring its role in providing financial security to families and businesses alike. However, rising fraud threatens this delicate balance.
Analysts warn that if unchecked, this racket could drive several insurers toward bankruptcy. Fraud not only inflates the cost of doing business but also makes insurance more expensive and less accessible. Processing times are lengthening as companies devote more effort to verifying claims. At the same time, overall trust in the system is being eroded.
Industry professionals have now appealed directly to Prime Minister Shehbaz Sharif, Finance Minister Muhammad Aurangzeb, and regulatory authorities, urging immediate action against what they describe as an entrenched mafia. They argue that without decisive steps to curb fraudulent claims, the sector’s survival and the livelihoods it sustains will be at risk.
