Money Markets
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.
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