The Insurance Regulatory Authority (IRA) has hit a major milestone in its fight against fraud by apprehending and arraigning in court 11 suspects believed to have been operating a sophisticated fraud syndicate in Western Kenya.
Fraud has been a problem for the insurance industry, with some reports estimating that as much as 50 per cent of insurance claims paid out are actually falsified.
“Insurance fraud threatens the financial strength of insurers and the survival of the insurance institution. This vice, if not managed, portends a real threat to the future of the sector,” said the regulator’s CEO Sammy Makove.
Data sharing
The head of the Insurance Fraud Investigation Unit (IFIU), Bridgit Kanyai, added that the syndicate in Western Kenya was able to, among other things, impersonate a base commander at a police station, a medical doctor, High Court judge and advocates to pursue fraudulent claims.
It also crafted a sophisticated mechanism that enabled it claim expensive medicines from various hospitals and pharmacies, which it then resold to these health centres.
Mr Makove noted that the insurance industry faces a number of challenges in dealing with fraud, including difficulty in detecting and quantifying fraud, difficulty in communicating information about it, lack of data-sharing mechanisms among insurers, lack of data analytics, skewed attitudes and a lack of public awareness on the issue.
Since its establishment three years ago, however, the IFIU — which is a partnership between the IRA and police — has handled 392 cases.
Between January and November 20, the unit has investigated 93 cases, with the amounts suspected to have been paid to fraudsters being Sh324.7 million.
Theft by insurance agents accounted for 23 per cent of these cases, motor accident injury claims took 19 per cent and medical claims 17 per cent.
In motor accidents, it is suspected that medical practitioners, advocates, police and ambulance chasers are the key perpetrators of fraud. However, the insurance authority said that chances of holding them culpable are remote, thus the persistence of the vice despite the prosecution of the claimants.
Agent fraud includes incidences of failure to remit premiums from policyholders to insurance companies.
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