Insurance fraud to end as new motor vehicle data system is launched

Police officers at the scene of an accident in Mbaruk area along Nairobi -Nakuru Highway. New motor vehicle data system expected to curb insurance fraud will be launched soon. PHOTO | JOSEPH KIHERI | NATION MEDIA GROUP 

In Summary

• Integrated Motor Insurance Data System is expected to revolutionalise insurance business.
• The system, set for activation this year, will completely make it impossible to make such claims.
• The IMIDS, to be linked to the Kenya Revenue Authority, Ministry of Transport and the Police, will help improve revenue collection, fast-track investigations into motor accidents and reduce litigation costs.

By JAMES KARIUKI
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A planned “clearing house” for insurance companies could fast track settlement of claims and drastically reduce the cost of premiums.

Association of Kenya Insurance (AKI) believes this will also help in positively changing the attitude among Kenyans towards insurance products. The uptake of these products stands at a lowly 3 per cent.

The Integrated Motor Insurance Data System (IMIDS) fronted by AKI is expected to revolutionalise insurance business since the current “analogue” setup has been found to have encourage fraud through which non-existent vehicles get insurance cover which is used to lodge claims for feigned accidents.

The system, to be activated this year, will completely make it impossible to make such claims.

The IMIDS, to be linked to the Kenya Revenue Authority (KRA), Ministry of Transport and the Police, will also help improve revenue collection, fast-track investigations into motor accidents and reduce litigation costs blamed on protracted cases that have threatened to sink general insurance business.

This follows Insurance Regulatory Authority’s assertion that 23 per cent of the fraudulent claims were perpetrated by insurance agents, with exorbitant fraudulent motor accident injuries claims that account for 19 per cent and false medical claims (17 per cent) being blamed on traffic officers, doctors and lawyers.

AKI’s lament follows a hefty increase in general insurance claims in 2014 that stood at Sh41.9 billion compared to Sh33.4 billion in 2013, which is a 25.3 per cent rise out of which about 20 per cent of the claims are believed to be non-existent.

TRACK INDIVIDUAL AGENTS

AKI said the new system would also help insurance companies to track individual agents and motor assessors where those found perpetrating the vice would be blacklisted.

About 100 suspicious claims are under probe by the Insurance Fraud Investigation Unit. And 11 suspects already charged in court where Sh324million was paid out.

AKI said that higher profits would mean well for the economy as insurance companies will pay higher taxes while insurance premiums will be reduced drastically, thereby luring more motorists to seek comprehensive cover for their vehicles.

DETECT MALPRACTICES

“With an increased open and inter-linked system, insurance companies will easily detect such malpractices long before they happen and ensure such people are prosecuted forthwith,” said a sector player.

(READ: Insurance fraud unit alleges cash siphoning scam)

Audit firm KPMG’s Insurance Fraud 2015 study also hinted that some unscrupulous individuals bought motor vehicle insurance cover for non-existent vehicles and later colluded with agents, police and lawyers to file claims for alleged injuries and motor vehicle damage that they were handsomely paid for.

“IMIDS will promote best practices through use of standard formats for processing underwriting and claims information across the industry as well as facilitate information sharing to assist members reduce risks and avoid losses through access to complete and accurate data,” says AKI.

Also, incidents where some insurance companies engage in undercutting would also be effectively addressed as all activities would be monitored.