How lawyers collude to steal from insurance companies

By ABIUD OCHIENG

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Friday February 28 2020

Unscrupulous lawyers have been defrauding insurance companies of millions of shillings through fake claims.

As a result, the Law Society of Kenya (LSK) has disbarred a number of lawyers.

LSK President Allen Gichuhi said that under the Advocates Act, erring lawyers are prosecuted and still appear before the LSK disciplinary tribunal.

“If it’s found that some lawyers are involved in fraud, the disciplinary tribunal has the option of striking them off the roll of advocates or order them to refund the money,” Mr Gichuhi said.

He said that there is a backlog of cases and sometimes those filing complaints have to wait for long to get redress.

SERVICE WEEK

LSK plans a customer service week to help speed up clearing of pending matters,” Mr Gichuhi said.

Insurers have identified some of the strategies lawyers use to fleece the industry.

In 2017, insurance companies joined hands to form the Security and Fraud Investigators Committee (SFIC) to deal with swindling.

The committee groups UAP Old Mutual Group, Jubilee Insurance, Britam Insurance Company, CIC Insurance Group and AON Minet, among others.

The Association of Kenya Insurers (AKI), the insurers’ lobby, has accepted SFIC as one of its committees.

THIRD-PARTY CLAIMS

Most fraud is related to third-party claims. These are liability claims brought by persons allegedly injured or harmed by the insured. The insured is the first party, the insurer is the second party, and the claimant the third. These type of claims, lodged as fatalities or injuries, often end up being inflated.

Forgery often starts at the occurrence book (OB) register at police stations.

It is virtually impossible for an insurance company to challenge the authenticity of a police abstract, which is prepared using details contained in the OB.

Mr Kiplimo Kebenei, the SFIC chairman, said that individuals conspire with lawyers and police officers to alter details of police abstracts after accidents.

The advocate then issues a notice on intention to sue the insurer. The notice is often delivered to the insurer just a day before the expiry date. The insurer, therefore, does not have sufficient time to prepare a response.

Some lawyers are not even known to the company and purport to represent employees in the firm.”

The lawyer, who often represents both genuine and fake claims, then goes to court.

The insurer is issued with summons to appear before court. The victims’ lawyer is quick to propose to the insurer’s lawyer an out-of-court settlement.

The victims’ advocate knows rates payable for different injuries, hence the claims are settled within set standards for particular injuries and disabilities.

A consent is then entered in court and adopted. Thereafter, delay in payment attracts interest at court rates. The scheme is made possible because in civil claims, the alleged injured persons are not necessarily required to appear in court.

The insurer then settles the claims with the victims’ lawyer.

The loot is then shared between the police who prepared the fake abstract, the lawyer representing non-existent clients, and perhaps the insurance company’s lawyer or officer who facilitated the quick payment of the claims.

Some lawyers file claims on behalf of employees allegedly injured at work.