Bane of fake motor insurance claims continues to stalk firms

One-third of fraudulent insurance claims in the first three months of this year involved fake claims of either stolen or damaged motor vehicles, new data shows.

According to the Insurance Regulatory Authority (IRA) quarterly report, there were 30 fraud cases reported across all the segments in the first quarter (Q1), with nine of those being in the motor insurance category.

Motor insurance and medical insurance classes account for 65.4 per cent of the industry’s gross premium income under the general insurance business, which makes up 66.3 per cent of the total premiums.

Surprisingly, there were only two fraudulent medical claims during the period under review.

“Fraud cases were reported to the Insurance Fraud Investigation Unit (IFIU). Twenty-seven cases were pending investigation, two cases were pending before the court and one was the pending arrest of known accused,” said IRA of the overall industry performance.

According to the report, there were four cases of agents trying to fleece the system and one against an insurance company employee.

IRA also reported a fake funeral claim as well as a life insurance claim as fraudsters became more brazen, including forging company documents. The regulator also reported a fraudulent motor vehicle injury claim.

The year started off with a 3.2 per cent growth in long-time insurance premiums to Sh22.64 billion, which continues to trail general insurance premiums that still dominate the market.

Premiums in the latter category, however, recorded a slower growth of 2.9 per cent to Sh44.58 billion compared to a growth of 4.2 per cent recorded in the previous year.

The general insurance business underwriters incurred Sh14.8 billion in claims in the quarter under review. The loss ratio was of 64.9 per cent during this period. “The general insurance business underwriters reported an underwriting loss of Sh378.30 million compared to an underwriting loss of Sh1.15 billion reported in Q1 2018, recording a significant (67.1 per cent) reduction in the losses,” said the regulator.

General reinsurance business sunk into the loss-making territory after the reinsurers incurred Sh3.09 billion in claims and Sh1.95 billion in direct expenses (commissions and management expenses).

This resulted in an underwriting loss of Sh1.39 billion million, driven mainly by claim expenses.

The general reinsurance business underwriters had reported an underwriting profit of Sh171.14 million in Q1, 2018.

Two more players - Waica Reinsurance Kenya and Ghana Reinsurance Company - have commenced statutory reporting to the authority, bringing the number of general reinsurance companies in the industry to five.

The others are Continental Reinsurance, East Africa Reinsurance and Kenya Reinsurance Corporation.