Insurance agent forgery hurting sector, IRA says
By Steve Umidha, January 10, 2023
The increase in fraudulent claims and forgery by agents continues to hurt insurers’ earnings as perpetrators get more refined, the latest statistics by the Insurance Regulatory Authority (IRA) reveal.
In the three months to September 2022, a total of 38 fraud cases were reported to the Insurance Fraud Investigation Unit (IFIU) – 11 of which were theft-related to agents, also known as brokers.
Fraudulent motor vehicle (accident) claims fraudulent and forged claims were also the largest contributors to the industry fraud cases reported between July and September last year, with 8 and 7 cases respectively.
The latest numbers now explain a surge in claims paid by firms in the quarter under review and put the spotlight on insurance mediators – who are often viewed as confidential specialists in providing consultative services to policyholders to develop the right coverage plans for their needs.
Figures by the insurance regulator for the third quarter of 2022 show that claims incurred in the period under review amounted to Sh56.85 billion, a 10.8 per cent jump from the Sh51.30 billion the industry reported in the previous quarter.
“The motor classes of insurance business incurred the largest amount of claims, contributing 47.9 per cent of total claims compared to business class at 29.4 per cent of the total premium under the general insurance business,” said a sector regulator.
Further, the IRA data shows that claims paid rose by 13.4 per cent to Sh53.25 billion compared to Sh46.97 billion paid in the third quarter of 2021. General insurers’ Medical, motor private, and motor commercial had the highest amounts of paid claims at 44.5 per cent, 24.6 per cent, and 21.5 per cent respectively of total industry paid claims under the general insurance business, with the three classes jointly constituting 90.6 per cent of all claims paid by general insurers.
Data from IRA shows a steady rise in spurious or fraudulent claims has been a factor behind the industry suffering an underwriting loss since 2019, noting that the sector average loss ratio over the last four years stood at 66.4 per cent. Insurance fraud occurs when someone knowingly lies to obtain a benefit or advantage to which they are not otherwise entitled or someone knowingly denies a benefit that is due and to which someone is entitled.
Most common schemes include premium diversion and workers’ compensation fraud, with most cases believed to be engineered by committers in the insurance company employees or claimants.
Attempts to charge persons found capable of committing insurance fraud had been mooted in 2018 by the National Treasury through an Insurance (Amendment) Bill, which had proposed a jail term of a period not exceeding five years for fraudsters.
Meanwhile, IRA figures also show that industry premiums increased by 11.4 per cent to hit Sh237.90 billion during the period from Sh213.53 billion in a similar quarter the year earlier.