Insurance fraud more than triples to Sh324 million

Money Markets

 

Sammy Makove, Insurance Regulatory Authority chief executive. PHOTO | FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• IRA has recorded 93 cases of fraud involving Sh324 million in the past 11 months compared to 88 involving Sh102 million last year.
• Motor and medical insurance classes were the most affected segments of the industry that accounted for more than half of the reported cases.
• High levels of fraud have the effect of pushing up the cost of premiums as insurers look to protect their margins.

Insurance fraud more than tripled this year, the industry regulator said in a newly-released report covering the past 11 months.

The Insurance Regulatory Authority (IRA) said it had recorded 93 cases of fraud involving Sh324 million in the past 11 months compared to 88 involving Sh102 million last year.

Motor and medical insurance classes were the most affected segments of the industry that accounted for more than half of the reported cases.

“The easy targets for insurance fraud have been motor third party. We have, however, seen an increase in work related injury claims as well as medical related classes in the past five years,” said Commissioner of insurance, Sammy Makove.

The report also showed that fraudsters have been targeting prominent Kenyans in their illicit scheme giving the example of MP Mutava Musyimi.

Mr Musyimi’s medical insurance account was the target of the attempted fraud. The fraudsters had created a fake medical card for Mr Musyimi’s parliamentary medical account, which has an outpatient medical cover limit of Sh300,000.

One of the suspects arrested for medical fraud is a pharmacist who has previously worked at MP Shah and the Aga Khan hospitals in Nairobi.

He had compiled a list of names of insured persons and their details, which he used to create fake medical cards.

The fake cards, which bear the photos of his employees, are then used to impersonate the bona fide clients and to collect expensive drugs from large hospitals based on prescriptions made by the pharmacist on fake sheets bearing the hospitals’ letterheads.

The drugs are then sold to other pharmacies fetching as high as Sh19,000 from one forged subscription.

“Companies without biometric systems are fully exposed to this fraud; photo-cards are easy to forge and hospitals rarely check them thoroughly,” said Tom Gichuhi, the chief executive of Association of Kenya Insurers (AKI).

The regulator has not been able to capture the depth of industry fraud because some of the hospitals opted not to pursue the fraudsters and merely asked that the cases be dropped after fraudulent claimants agreed to settle the bills.

Insurance companies are also said to be reluctant to report the cases, fearing reputational damage to their business.

A report by advisory firm KPMG released early this year estimates that 25 per cent of health claims made in Kenya are fraudulent. Last year, the sector paid out Sh1.9 billion in medical claims, meaning insurance firms may have lost up to Sh500 million to fraudsters.

High levels of fraud have the effect of pushing up the cost of premiums as insurers look to protect their margins.