Are policyholders in KSA exploiting the process flaw of a Motor Insurance claim???

Well, for the general audience, let me give a background on how the motor insurance claims settlement works globally and in KSA.

Policyholder Mohammed has a motor policy from an "X" insurance company and is hit by Rayan holding a motor policy from a "Y" company.

Globally (Most countries): Upon the accident, both parties notify their respective insurance companies, and then the companies appoint the surveyor to assess the damage and submit a preliminary assessment report, wherein the surveyor determines the fault %, and let's say, Rayan was 100% fault. As per the insurance contract, the insurance company "X" is liable to indemnify the insured Mohammed by allowing him to opt for cashless or reimbursement. In the case of cashless, the damaged car will be repaired at network garages and whereas in reimbursement, the policyholder must pay for the repair and submit the bills to the"X" insurance company. After settling the claim to the insured, as per the subrogation law, the insurance company "X" is entitled to claim the paid amount from Rayan and/or the "Y" insurance company.

KSA: In case of an accident, the NAJM or Traffic police is informed about documenting the details of the accident and providing an estimation of repair. As Rayan's fault is determined as 100%, then the insurance company "Y" will credit the estimated amount to Mohammed's bank account.

FLAW 1: As the estimated claim amount (Let's say SAR 5000) is credited to Mohammed's bank account, he might decide to opt for L2 or lesser quality spare parts instead of OEM spare parts or might use the service of the unqualified workshop for the repair which cost him (SAR 2000), here Mohammed utilized the balance amount (SAR 3000) for his own expenses.

FLAW 2: This process gap is being used by policyholders to benefit from it. Two policyholders can collude and deliberately damage the car and claim the repair cost from the third-party insurance company, and the unutilized amount is distributed amongst them.

FLAW3: After crediting the estimated amount to the third-party insured, the insurance company, in return not seek the bills from the damaged party to validate the consumption of the amount indemnified, nor is data not collected to see what type/quality of spare parts used, service center/workshop details/cost of labor, etc. to assess the cost incurred through direct credit vs. repair in their network garages or to perform any other analytics.

Flaw 4: In the case of direct credit of the estimated amount to the damaged party's bank account, there is no possibility of kicking in the subrogation law. This law is Void for this scenario.

Flaw 5: If the insured gets the repair done with low-quality spare parts or an unskilled technician, the car's performance might be impacted, which might later cause breakdowns or high-value damage in case of an accident. Also, the insured can resubmit the claim by fabricating or recreating the accident/engineering the accident.

Recommendation:

1) It is recommended that the insurance companies have a dialogue with the regulator (SAMA) and ensure the law is amended in the interest of the insurance companies and to combat fraud.

2) Otherwise/Meanwhile, it is recommended to seek the bills from the damaged party and validate with the amount credited or allow the damaged party to get the repair at network garages or let his insurance company indemnify and later can be claimed from the third party insurer.

Note: As per the NAJM report of 2019, 47% of motor insurance claims fraud results from damage mismatches, old damage at 22%, engineered accidents at 21%, and phantom drivers at 10%.

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Disclaimer: All my views are personal.