Last year, the local media highlighted an insurance fraud case where a husband and wife decided to fake the husband’s death and the death certificate, then have the wife claim compensation from their insurer.
Prior to this story, there had been a case involving 11 individuals who were arrested and arraigned in court, suspected to be part of a fraud ring conspiring to defraud a local insurer of Sh15 million by forging the insurer’s medical cards and hospital prescriptions and using them to acquire medical drugs from various health institutions.
And then there was the case of an insurance investigator who was arrested and prosecuted last September, accused of pretending to be in a position to influence motor insurance claim payment.
Fake deaths, fake accidents, inflated damages, staged accidents, on and on the scams go.
Insurance fraud has been a consistently growing concern for insurers in Kenya with an increasing share of the claims payments done being attributed to the vice.
According to the Insurance Regulatory Authority quarter four report for 2015, the Insurance Fraud Investigation Unit recorded 106 cases reported in 2015 which was an increase from the 87 in 2014.
The amount lost increased from Sh102.76 million reported in 2014 to Sh366.90 million. Of the 106 cases reported, motor underwriting led the list with 42 cases, followed by agent/broker fraud at 25 and medical in third place with 17 cases.
Insurance fraud is prevalent across the entire insurance value chain with the most affected areas being claims and underwriting but as technology evolves and fraudster tactics become more sophisticated, insurers are now increasingly having to deal with other forms of theft including internal fraud and money laundering as well as the emerging issue of cyber fraud.
The KPMG East Africa Insurance Fraud Risk Survey 2015 highlights better assessment of risk at proposal stage and improvement of internal controls as some areas of focus that the region, and Kenya in particular, need to concentrate on if the threat of fraud risk is to be curtailed. Also mentioned in the survey report is data analytics.
In the past, insurance companies have relied heavily on fraud investigators to look into suspicious cases and determine whether fraud has occurred.
But as our world and technology evolves, we are witnessing a new breed of fraudsters (and fraud rings) using more advanced techniques.
This new challenge demands that the insurance industry shifts to improved fraud detection initiatives. Insurers now need to be thinking about new data solutions, workflow streamlining and improved risk management.
To combat fraud more effectively, the ability to collect and analyse huge volumes and varieties of data is essential.
Insurers collect large amounts of data but what many lack is the ability to quickly and systematically evaluate that data in order to identify activities and patterns indicative of potential fraud.
There are new technology tools and techniques in the market that can help insurers uncover complex or organised fraud activities using both structured and unstructured data.
Credit: Business Daily