Insurers enhance fraud monitoring

Insurers have come up with an information sharing system they hope will help cut fraud and fake motor vehicle accident claims to check losses.

The system, to be unveiled on Thursday, will see data on motor vehicle insurance stored at a central server from which the 43 companies will access information on claims.

Through their umbrella body Association of Kenya Insurers (AKI), insurance companies are teaming up with telecoms firm Safaricom to draw up the Integrated Motor Insurance Data System to stop fraudsters in the motor vehicle insurance segment.

Because of weak coordination in the industry, cheats have been able to make several claims in one case from more than one insurer, leading to losses.

The law provides for a single insurance per vehicle, but making multiple claims has cost the industry billions of shillings, leading the collapse of some firms in the last decade.

“Sharing data will cut back on a huge number of frauds,” said Joseph Kiuna, the CEO of the Real Insurance Company.

By resorting to information technology tool, it will now be possible to monitor details of all insured vehicles, accident and theft reports, and settled claims.

Estimates show that about 40 per cent of claims running into billions of shillings paid in a year are fraudulent.

This means that in 2008, for example, when the net claims totalled Sh24.8 billion, Sh9.9 billion should not have been paid.

While the 43 insurance firms pay as much as 84.5 per cent of collected premiums as claims, the industry average for other business segments such as health is 50 per cent.

Managers say the move to curb fraud could herald reduced premium payments as the players factor in the reduced risks.

Authentic reports

Invesco Assurance, Blue Shield Insurance and Directline Insurance have recently sought court protection from over 10,000 claimants, seeking time to establish the authenticity of their claims.

All insurance companies offering motor vehicle insurance and are members of AKI financed the setting up of the project.

Fraudsters in the private motor vehicle insurance have had a field day milking the industry dry through fake reports that, according to the 2008 figures, operators pay 84.5 per cent of premiums as claims.