An insurance investigator was arrested and prosecuted at Milimani Law Courts in Nairobi last week in what is seen as high-gear drive by the Insurance Regulatory Authority (IRA) to rid the industry of the deep-seated mess of insurance fraud.
It was alleged that on September 19, John Wainaina Marugu while outside Hilton Hotel in Nairobi obtained Sh20,000 from Calvin Masitsa Ambajo, the complainant noted in the charge sheet. Mr Wainaina, an insurance investigator, is accused of falsely pretending to be in a position to influence insurance claim payment for motor vehicle Registration Number KBS 015H at CIC Insurance Company Limited.
Figures from the regulator indicate that motor insurance is the hardest hit by the menace of insurance fraud. In 2012/2013, about 29 per cent of cases of insurance fraud reported were on motor vehicle insurance. There were 14 fraudulent accident claims, 11 forged insurance certificates and 31 fraudulent theft insurance claims.
The trend was replicated in 2014 and 2015 where reported cases of fraud in motor insurance were 27 and 33, respectively.
The other area which reported high incidences of fraud was among insurance sales agents — in particular theft by insurance agents. In the 2012/2013 period, there were 54 cases of fraud reported. This was slightly below that in motor insurance in which 56 cases were reported.
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Fraud under workman’s compensations and by insurance companies came third and fourth respectively with the former recording 28 cases while the latter reported 20. There were 11 cases of fraud reported under the funeral last expense. There was no case reported on personal accident and life claim in this period.
The Commissioner for IRA Mr Sammy Makove in an exclusive interview with Weekend Business concurred that insurance fraud is a thorn in the back of insurance industry in Kenya but was quick to clarify that the problem is not unique to Kenya.
“It is a crime committed with persons who see loopholes in a system,” he noted. He said motor insurance — especially of PSVs — is one of the ‘biggest soft spot’ for fraudsters.
“In those days before the Michuki rules, a 14-seater could crash in a certain area and then more than 40 people could come to claim,” he explained.
But this has since changed, according to Mr Makove. He noted that through innovative ICT platforms, accidents can be reported in real time as they happen, for example through texts.
“Also, in the case of matatu businesses, all matatus are supposed to belong to a Sacco,” said Makove, who noted that this has injected some ethical behaviour and self-policing in the industry.
“We, thus, do hope that in the claims being paid, there would be very few cases of fraud,” he added.
Cases of fraud fell drastically from a high of 191 in 2012-2013 to 88 cases. This represented a reduction of about 54 per cent.
Indeed, besides fraudulent personal accident claims which increased to three from zero in 2012/2013 period and fraudulent life claims that rose from zero to four, all the other areas dropped. The decrease continued into 2015 where total reported cases of fraud were 17 less than in the previous year.
The regulator also notes that as of August of this year, the insurance fraud unit had disposed of 30 cases of fraud 12 of which were convictions.
However, close to 57 per cent of cases are pending as they are still under investigation. Twenty-four cases are pending before the courts. Only 7 per cent of cases have been finalised and complaints advised.
The fact that slightly over 80 per cent have not been disposed can be a source of worry. However, Makove was optimistic. “The statistics we have given are quantitative. Qualitatively, the unit has been able to send a clear signal, which has brought down any thought of committing an insurance fraud. Even ambulance chasers have kept a low profile as a result of those signals,” said Makove.
Makove insisted that many incidents which are reported as insurance fraud are not really fraud in the strictest sense of the term.
According to Makove, fraud is more systematic and can involve a number of players exploiting a loophole in the insurance system over an extended period of time.
The commissioner noted that medical insurance is one of the insurance sectors that are prone to fraud.
“Unless the underwriter has a good IT platform that could easily vet the members of a scheme, it is difficult to tell who is a beneficiary of a medical scheme,” he said, noting that there are also cases of connivance between employers of an insurance company and those of an insurance provider.
“There are cases where one is treated for flu but the doctor indicates in his or her report that it is another condition,” he explained.
According to a report released earlier this year by audit firm KPMG, while Kenya had low volume of fraudulent claims detected —18 — when compared to Tanzania’s 104, Kenya had the highest number of undetected fraud cases in the region.
The report by KPMG read in part: “Kenya was unable to quantify the detected volume of policy fraud and had a low number of detected claims fraud cases compared to Tanzania but higher than Uganda.”