Insurance fraud has risen to alarming levels

Fraudsters are moving like a storm in the insurance industry, lodging false claims and causing unnecessary increases in insurance premiums in the country.

This truth has been starkly underlined by the revelation by the Association of Kenya Insurers (AKI) that 30-40 per cent of claims paid out in the country are dishonest.

Going by profits in the industry in the past three years, it means the industry is paying out more than Sh10 billion annually to fraudsters.

Higher premiums

Some analysts have linked the trend to a slowing economy. They argue that unscrupulous car owners and other insured individuals with payments they can’t afford are turning to fraud to break their debts.

This isn’t new because insurance fraud and other forms of trickery have been going on for many years. However, in an industry that is waking up to realities thrust upon it by technology and where considerable skills must be combined with detailed knowledge and understanding, those who seek to cheat the system by claiming what should not be due to them, are a criminal menace.

It is bad enough for anyone to lie about an accident. It is even less acceptable for cartels of professionals to connive and commit fraud.

AKI says only six companies out of the 32 underwriting private motor vehicle business made profits in 2009. It does not make economic sense to surcharge honest people for sins committed by a few dishonest people.

Private motorists now pay up to eight per cent of the value of their vehicles in annual premiums for comprehensive insurance cover, up from 4.5 per cent they had been paying until early last year.

This is too costly and is only possible because those meant to enforce the law are asleep.