Private cars hit insurers for Sh4.7b
Thursday, October 22nd, 2020
- Insurance fraud is a bigger problem in Kenya than it is reported, with cases of fraudsters perpetrating scams through stage-managed accidents increasing annually.
- Fraudsters have tapped the market forcing unsuspecting insurance firms to pay huge amounts to cheat.
- As auto insurance fraud increased, so did the number of people who believe cheating an auto insurer is acceptable.
Steve Umidha @UmidhaSteve
General insurance for the private motor vehicle pool was hard hit in 2019 posting Sh4.7 billion in losses, says latest industry report by Association of Kenya Insurers (AKI).
The surge comes on the back of a Sh2.7 billion loss in 2018 and Sh2.74 billion in 2017, as insurers question rampant fraud by private vehicle owners raising concerns on the role of insurance agents and garage owners in this web.
“Such rip-offs cost insurance billions of shillings yearly in claims settlement and unfortunately, such cases have become more prevalent owing to poor economy that is causing some people to resort to desperate measures to put food on the table,” says Reuben Owiti, an insurance consultant at a local firm.
Industry statistics estimates more than 40 per cent of motor vehicle insurance policies in Kenya are fraudulent according to a study by Kenyan insure Tech Company Bismart targeting 146 people settled in Nairobi alone.
“That 22 per cent of motor vehicle insurance policies could not be verified.
Another 12 per cent of the covers simply did not exist in the books of the underwriters,” AKI said in the report.
Insurance fraud is believed to undermine 8-10 per cent of the turnover of local companies.
The most common practice is when motorists anticipate being hit, then fake injuries then reports the car to file a claim.
The AKI report further shows that motor commercial class made a loss of Sh2.68 billion last year compared to a loss of Sh1.12 billion in 2018 while motor combined registered underwriting loss of Sh7.3 billion during the year.
“Private motor insurance recorded the highest technical loss ratio of 78.13 per cent compared to 68.92 per cent in 2018 while motor commercial insurance recorded the third highest loss ratio of 68.97 per cent in 2019 as opposed to 60.76 per cent in 2018,” the report noted.