Fraud, forged claims surged in Q2 of 2021
Fraudulent claims and forgery continue to shed earnings at insurance firms as culprits get more sophisticated, says recent Insurance Regulatory Authority (IRA) report.
In the three months to June 2021, a total of 16 fraud cases were reported to the Insurance Fraud Investigation Unit (IFIU), in what now explains a surge in claims paid by firms.
These increased general insurance business to Sh32.38 billion during the quarter, compared to Sh28.08 billion reported a year earlier.
Fraudulent motor vehicle (accident) claims, fraudulent medical claims and forged claims have been the largest contributors to the industry fraud cases reported for the longest time.
The quarter under review saw 8 fraud cases reported in April, 6 in May and 2 in June.
A similar trend was noticed in the fourth quarter last year where medical, motor private and motor commercial had the highest amounts of paid claims at 37.7 per cent, 26.0 per cent and 22.7 per cent, respectively, of total industry paid claims under general insurance business.
During the quarter under review, medical, motor private and motor commercial had the highest amounts of paid claims at 39.3 per cent, 26.9 per cent and 21.5 per cent of total industry paid claims under general insurance business.
The underwriting performance of the general insurance business equally registered a loss of Sh1.46 billion compared to a profit of Sh 62.45 million reported in a similar period last year.
The sector whose penetration level has been on a downward spiral since 2018 is particularly vulnerable to money laundering activities due to the wide range of money transfer processes inherent to the trade, despite insurance companies adopting innovation and modern technology to help curb the vice.
It includes transfer of ownership to withdrawal at maturity, premium overpayment, premium refunds and other ills some of which are not reported.
Life insurance firms are at particular risk because of the massive flows of funds into and out of their businesses.