Insurers move to adopt data-sharing in fight against fraud

Mr Alex Mbai, KPMG Kenya audit partner and IFRS expert. FILE PHOTO | NMG 

By JAMES NGUNJIRI

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Summary

• Forum calls for investments in new systems to accommodate big data.

Insurers are moving towards data-sharing to fight rising cases of fraud, ahead of the implementation of a new insurance reporting requirement under International Financial Reporting Standards (IFRS-17).

The standard, to be effected at the beginning of year 2021, will lead to new or upgraded systems, production of more data, and reshape the primary statements and change the disclosures in insurers’ financial statements.

But one of the biggest challenge facing insurance firms is data-sharing to curb fraud, especially in motor and medical covers.

Even though insurers have introduced the Integrated Motor Insurance Database System (IMIDS), a reservoir of data meant to provide insights and trends on the motor insurance class of business, the main challenge however remains the quantity and quality of data.

KPMG Kenya audit partner and IFRS expert Alex Mbai on Wednesday said the current challenge is that insurers do not know or fully account for their exact fraud exposures.

“One of the biggest problem in insurance industry is data, and insurance companies will have to invest in new systems to accommodate the big data,” said Mr Mbai during an IFRS 17 forum called by KPMG Kenya and Zamara in Nairobi.

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During the forum, IFRS experts said the standard will bring a lot of scrutiny and uniformity in reporting and that insurers will not work in isolation as they will be required to share information. Insurance firms will implement the IFRS 17 and make it operational alongside IFRS 9, which became effective in January.

KPMG insurance surveys in East Africa have in the past indicated that about 25 per cent of premiums charged by insurance firms goes to cover fraud risks and related costs.

Data from the Insurance Regulatory Authority (IRA) for the year ended December 2017 indicates that claims incurred under general business for the motor private cover hit Sh13.98 billion, motor commercial (Sh9.40 billion), motor commercial PSV (Sh2.81 billion), and medical cover (Sh19.72 billion).