03 Jul Why Is Car Insurance Fraud Rising In Kenya?
General Insurance companies are handling a double-edged sword when it comes to the provision of car insurance. On one hand, car insurance is assured business for them because it is illegal for Kenyans to drive cars that have no insurance.
This however means that insurance companies must deal with all manner of customers, the naïve, the crafty, the innocent, and of course, the fraudulent. The total cost of fraud to the insurance sector stood at Ksh 307 Million at the end of 2015.
Mark you, this is the value of fraud that was detected and reported. Car insurance fraud was the single largest contributor to insurance fraud. Here are three reasons why car insurance fraud may be on the rise.
A thriving Culture of Corruption
A certain amount of the motivation for fraud is simply the culture of corruption that thriving in this country. Fact is, all countries in the world have a corruption problem.
The problem with the Kenyan version is its pervasiveness and the reasonable expectation people have to get away with it. The environment therefore emboldens fraudsters. It seems a good number of them have their eyes trained on the insurance sector.
As long as fraud remains a promising way of making quick cash, there will always be a certain number of people willing to take the risk to make a killing. It is unreasonable to expect fraud cases to drop to zero, but it is also unacceptable to accept fraud as a normal occurrence in the country.
Ineffective Due Diligence
The second factor driving the increasing rates of fraud in the motor insurance sector is ineffective due diligence carried out by insurance companies. All insurance companies usually try to make it as easy as possible for their potential customers to buy insurance.
In the process, it becomes easy to skip or skim over some very critical aspects regarding the profile of their potential customers. The result is comparable to fishing nets catching all manner of sea creatures.
Apart from the loopholes that come about from sales and marketing efforts, insurance companies are also faced with the challenge of conducting thorough investigations to ascertain whether claims are genuine.
The thoroughness of the investigation is usually dependent on the skills of the investigators and the volume of work they have at any one time.
In other words, an overworked investigator is not capable of detecting fraud, much less proving it, if the fraudster is sophisticated. Insurance companies will find it necessary to invest more in due diligence and in fraud investigation to reduce the odds of success for fraudulent claims.
Products Galore-Claims Galore
Insurance companies are also in a bind when it comes to fraud detection because of the ever-increasing demand for motor vehicle insurance.
It is estimated that on average, ten new cars are received in the city on a daily basis. In addition, motor insurance companies have increased the diversity of products they offer with motor insurance policies.
With more insurable risks covered, the chances of a specific driver making a claim have gone up. This simply overwhelms their systems, and even the most robust insurance company is bound to be overstretched at some point.
Insurance companies will have to think more on what they can do to reduce fraud incidents in the sector. There is a chance that they can use more technological options to detect fraud.