Fraudulent Insurance Claims Hurting the Economy, IRA Warns

The Insurance Regulatory Authority (IRA) has urged Kenyans to desist from making fraudulent insurance claims as the practice was hurting the economy, keeping premiums high and slowing down claims settlement pace.

The regulator indicated that the malpractices that included false motor accident (injury) claims, stealing by agents, conspiracy to defraud and fraudulent motor theft claims were 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).

Making a presentation during a forum held in Nakuru and aimed at educating matatu operators on the nature of insurance products, contracts as well the policy holders' rights and obligations, IRA Corporate Communications Officer Ms. Rosemary Kavili however 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.

One in every five insurance claims made is fraudulent, according to the Insurance Regulatory Authority (IRA).

Ms. Kavili observed that 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.

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 overcharging those who are insured.

Ms. Kavindu noted that the IRA has signed a pact with National Transport and Safety Authority (NTSA) to include insurance details as part of their database to help stop multiple uses of the same number plates to buy insurance for different vehicles.

The deal has seen insurance companies send their motor vehicle insurance policies to the Transport Integrated Management System (TIMS) in real-time while at the same time providing insurance companies with a way of validating vehicle ownership.

"This agreement is designed to curb fraud and other vices in the motor vehicle class of insurance business and ultimately this will quicken the time taken to settle motor vehicle insurance claims since detailed data on the motor vehicles would be readily available," Ms. Kavili indicated.

Initially, NTSA piloted the integrated system with 14 insurance service providers which it said proved successful and now wants to bring on board all insurance firms onto the platform.

Ms. Kavili explained that the industry was critical to the country's development as it contributed to the economy by providing financial security, mobilizing savings and promoting direct and indirect investments. She added that fraud was hurting the industry's stability and profitability.

The official pointed out that the IRA was encouraging industry players must 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," said the Corporate Communications Officer.

Some fraud cases involve individuals who have taken loans to buy cars and fake accidents to get funds to pay the loans, to those who take private covers for public service vehicles.

Motor assessors and garages also collude to commit fraud, with others, selling vehicles across the border and on the pretense that they have been stolen, worsening an already bad situation.