When ‘dead men’ cheat insurers out of millions of shillings
By Kamau Muthoni and Faith Karanja | March 29th 2016
NAIROBI: Some fake death to claim insurance compensation. Others insure their vehicles with several firms and then fake accidents and simultaneously seek separate compensation. They all work in collusion with officers from relevant State agencies and insiders within the insurance firms.
Take the example of Rachel Adhiambo and her husband Ezekiel Ochieng Ogoma who are in court charged with claiming compensation from different insurance companies by faking death.
On April 8, 2014, Mr Ogoma and his wife were charged with conspiring to defraud Pan Africa Assurance Company of Sh634,936 by pretending that Ogoma had died. According to prosecutors, the scheme was to fake the death of Ogoma complete with certification and then have the wife file a claim for compensation from their insurers.
The couple was charged for the second time on May 30, 2014 with claiming compensation from Jubilee Insurance Company. Ogoma, who is alleged to have died in a road accident on the Kisumu-Siaya road in January, and his wife appeared before Milimani Senior Principal Magistrate Peter Ndwiga and denied five counts of forgery and fraud.
Alex Mwangi, an assistant customer service manager at Jubilee Insurance, told the court that Ogoma and his wife faked his death and received the compensation in 2013. And last week during the hearing of the case before Chief Magistrate Daniel Ogembo, Mr Mwangi said Ms Adhiambo produced a certificate of claim together with forged documents.
He explained that the company's investigative department conducted investigations after they raised suspicion over the transaction.
Mwangi revealed that the investigators realised that the claimant was alive. The transaction, according to Mwangi, was completed on September 24, 2013.
In another pending matter on similar fraud, three employees of an insurance company are fighting two separate charges of faking the deaths of two men to facilitate payments of Sh10 million compensation.
In yet another incident, the Court of Appeal overturned a High Court award of Sh2 million for a motorist with the judges ruling he had made up a story of how he had hit a buffalo. (see separate stories).
Between January and November 20 last year, the Insurance Fraud Investigation Unit (IFIU) investigated 93 insurance fraud cases, with the amounts suspected to have been paid to fraudsters standing at Sh324.7 million.
The cases are among many in court involving alleged fraudulent insurance claims.
Insurers have lost money through fake motor vehicle claims. Other losses came through medical cover scams, con insurance agents, unprofessional employees, fake funeral claims as well as fire damage, workmen compensation and life cover claims.
According to industry regulator, the Insurance Regulatory Authority (IRA), in 2012 some 133 fraud cases were reported, 57 in 2013 and 87 in 2014.
Of the 133 cases, the highest number involved agents. IRA revealed that insurance agents contributed to 38 cases and motor vehicles 35.
The report covering 2012 to 2014 also indicated that workmen compensation fraudulent claims stood at 22. There were nine fake funeral expenses claims in the same year and two fraudulent fire and investment scheme claims.
Ten cases were recorded in relation to insurance employees. There were six medical fraudulent claims in 2012.
The head of the Jubilee Insurance Fraud Investigation Unit, Kiplimo Kebenei, told The Standard that the syndicates at times involve internal insurance assessors and adjusters who collude with fraudsters to earn easy money.
"We have fired several internal adjusters and assessors after discovering that they were a part of a syndicate," he said adding that car owners collude with garage owners to swindle insurance firms.
In the report, the majority of fraudulent claims in relation to motor vehicles were to do with stolen cars, followed by fraudulent accident claims. Eight others fraudsters were caught with doctored insurance certificates.
On vehicles, Mr Kebenei explained, fraudsters usually change the chassis to conceal the lie that it had an accident or was stolen.
He narrated a scenario where an insured vehicle was involved in an accident and the owner received compensation. The company sold the vehicle to another client who later complained that the chassis number had been removed.
The same person who had received the compensation came back wanting to buy the same motor vehicle because he had fabricated the accident.
The officer said the fraudsters normally apply for the claim immediately. "We have fired all the collaborators who are within this insurance company," said Kebenei.
"We normally conduct risk assessment once a year depending on the intelligence," said Kebenei.
The insurance industry saw a decline in fraudulent insurance claims by 76 cases in 2013.
Of the number of cases recorded by the IRA, motor vehicle fraudulent claims remained high at 21, followed by theft by insurance employees and theft by insurance agents, which tallied at ten and six cases respectively. There were also two fraudulent funeral expenses claims.
In court on Thursday last week, a Jubilee Insurance agent pleaded guilty to stealing Sh244,350 from the company.
Peter Makau Edward alias Peter Makau Edward Nduati admitted stealing from the company before Senior Principal Magistrate Joyce Ngandani.
He committed the crime on diverse dates between June 9, 2011 and October 2015 at Wood Street Clinic and Nursing.
The money was allegedly passed on to him by Safia Mohamed Sallah to pay for insurance policy premiums. The case will resume on April 2.
In 2014, the number of fraudulent claims rose by 30 cases, from 57, and again the fraud was concentrated in motor vehicles, which recorded 27 cases. There were four cases related to funeral expenses and a similar number in life insurance cover.
Insurance agents, according to the IRA, contributed to 25 incidents whereas there were seven cooked up medial claims.
The IRA report says that a major challenge in fighting fraud is lack of laws on insurance fraud offences in the Insurance Act. Transferring the prosecution mandate from police prosecutors to the Director of Public Prosecutions was also cited as a challenge in the fight against fraudsters.
Insurance companies, according to the report, were said to lack a common fraud information-sharing platform and also lacked anti-fraud policies.
Massive transfer of magistrates, according to the report, led to some of the cases being started afresh.
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