Car insurance fraud in Nairobi very high

According to a research released by Bismart, a leading insure tech, only 60 percent of motorists polled in Nairobi can confirm full insurance cover. 

While it was not possible to verify the true status of 22% of the motor insurance policies, the research confirmed that 12% of the covers simply did not exist in the books of the underwriters despite full payment for the cover and motorists having cover certificates.

And according to the research, about 3% of the policies were reported to be unpaid and premiums not remitted to the insurance company, despite the holders having insurance stickers. Such policies were at the risk of being cancelled from the books, again leaving the insured exposed to risk.

In addition, about 1% of the policies were registered as 3rd party covers despite the clients paying for and bearing certificates for comprehensive covers.

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Bismart carried a three-week research focused on fraud at the point of buying cover and polled 146 policy holders from Nairobi County with  car insurance policies from 25 insurance companies to get a better understanding of how fraud is perpetrated by insurance intermediaries. The insurance holders were asked to ascertain the status of the insurance cover policies purchased through various insurance intermediaries for a period of 1 week.

One customer said she had an accident and when she went to claim, she was told that the insurance company did not have her details in their system, despite having paid for the premiums.  Another customer with a broken windscreen could not get compensated despite paying for a comprehensive cover for a whole year.

According to Ms Eunice Maina, the CEO Bismart Insurance, fraud in motor insurance is very perverse in the insurance sector, and many motorists are driving around without protection even after they had paid for it.

“The fact that you have an insurance sticker does not mean that you have insurance cover. It is good for motorists to verify the state of their cover to avoid exposure in case of an accident,” Ms Maina said

She challenged insurance policy holders to verify their policies by communicating directly to their underwriters after purchasing insurance through intermediaries, and not to pay premiums to intermediaries but directly to the company .

She also recommended the use of block chain technology in mitigating fraud in the sales process where all the parties share and sign off on information in order to complete the policy purchase.

Potential policy holders should also use online and digital platforms to do research on the reputation and trust levels for both intermediaries and underwriters before purchasing their covers.

A recent report released by Association of Kenya Insurers (AKI) estimated the cost of insurance fraud to be between 8% and 10% of the industry’s total amount paid up for health care insurance costs and losses & damage to property (mostly vehicles). Given that a large number of fraudulent transactions go undetected; this number could potentially be significantly higher than reported.