Insurance Regulatory Authority said one in every five insurance claims made is fraudulent which is hurting the economy
Fraudulent claims, especially in general insurance (motor and medical) are inflating premiums in Kenya by up to 25 per cent which is hurting the economy and slowing down the pace of claims settlement.
The Insurance Regulatory Authority (IRA) said one in every five insurance claims made is fraudulent, with false motor accident/injury, theft by agents, conspiracy to defraud and sham motor theft claims among the leading malpractices.
Speaking in a Nakuru at a forum to educate matatu operators on the nature of insurance products, IRA Corporate Communications officer Rosemary Kavili, however, said cases of fake claims have been on a steady decline over the last five years as the industry stepped up vigilance.
“Insurers have in the past raised concern that cases of fraud in the form of multiple insurance contracts and claims on a single vehicle are rampant. But these are going down because of enhanced transparency and disclosure of information during claims,” Ms Kavili said.
The officer added that the IRA has signed a pact with the National Transport and Safety Authority (NTSA) to include insurance details in their database to help stop multiple uses of the same number plates to buy insurance for different vehicles.
As such, insurance companies are able to send their motor vehicle insurance policies to the Transport Integrated Management System (TIMS) in real-time which gives them a way to validate vehicle ownership.
“This agreement is designed to curb fraud and other vices in the motor vehicle class of insurance business and will ultimately quicken the time taken to settle motor vehicle insurance claims since detailed data on the motor vehicles would be readily available,” Ms Kavili said.
The NTSA successfully piloted the integrated system with 14 insurance service providers and now wants to bring on board all insurance firms onto the platform.
Concerns have also been raised over a growing number of fraudsters who collude with hospitals to fleece millions of shillings from firms in fake surgeries and treatments, while health service providers are said to overcharge those who are insured.
Kavili said the industry was critical to the country’s development as it provides financial security, mobilises savings and promotes direct and indirect investments. She added that fraud was hurting the industry’s stability and profitability.
IRA, she said, was encouraging industry players to take extra measures to curb the trend adding that the authority had done its part by putting in place an insurance fraud investigation unit.
“Technology can help cut paperwork, validate documents from customers and provide permanent audit trails that can be used to identify claims. Service providers must now put enterprise risk management systems to deal with fraud. The losses impact negatively on the underwriters’ solvency which may kill them,” she said.
Other common fraud cases involve individuals who have taken loans to buy cars and fake accidents to get compensation and others who take private covers for public service vehicles.
Rogue motor assessors and garages also collude to commit fraud, with some selling vehicles across the border and on the pretence that they have been stolen.
Source: MY Gov