Kenya's economy is facing a significant threat from fraudulent insurance claims, which are inflating premiums and slowing down claims settlement pace. According to the Insurance Regulatory Authority (IRA), one in every five insurance claims made in the country is fraudulent.
The IRA has urged Kenyans to desist from making fraudulent insurance claims, which are hurting the economy and keeping premiums high. The regulator has indicated that the malpractices, including false motor accident claims, stealing by agents, conspiracy to defraud, and fraudulent motor theft claims, are inflating insurance premiums in Kenya by up to 25 per cent.
Players in the sector have been decrying huge losses associated with fake claims, especially in general insurance (motor insurance and medical insurance). However, the IRA has noted that cases of fake claims have been on a steady decline over the last five years as the industry stepped up ways of curbing fraud by enhancing transparency and disclosure of information during claims.
Ms. Rosemary Kavili, the IRA Corporate Communications Officer, made a presentation during a forum held in Nakuru to educate matatu operators on the nature of insurance products, contracts, and policy holders' rights and obligations. She noted that the industry was critical to the country's development, contributing to the economy by providing financial security, mobilizing savings, and promoting direct and indirect investments.
Ms. Kavili explained that fraud was hurting the industry's stability and profitability, and that the IRA was encouraging industry players to take extra measures to curb the trend. She added that the authority had done its part by putting in place an insurance fraud investigation unit.
Ms. Kavili also highlighted the importance of technology in curbing fraud, stating that it can help cut paperwork, validate documents from customers, and provide permanent audit trails that can be used to identify claims. She emphasized that service providers must put enterprise risk management systems in place to deal with fraud, as the losses impact negatively on the underwriters' solvency, which may kill them.
Some fraud cases involve individuals who have taken loans to buy cars and fake accidents to get funds to pay the loans, while others take private covers for public service vehicles. Motor assessors and garages also collude to commit fraud, selling vehicles across the border and claiming they have been stolen.