Implication Of Fraud On The Competitiveness Of Insurance Companies In Kenya

Abstract

This study sought to assess the implications of fraud on the competitiveness of insurance companies in Kenya: a census study of insurance companies in Kenya. This is for the reason that for decades now, the insurance industry in Kenya has been grappling the threat of fraud which greatly eats into the revenue income and to the extreme, into their profit margin. According to IRA about 40% of total claims paid in the year 2015 equivalent of Kshs. 324 Million were fraudulent claims. For instance, in the Past years the country witnessed the collapse of well established insurance companies as a result of fraud. This study sought to investigate the Implication of fraud on competitiveness of insurance companies in Kenya. The study adopted a census survey study across the 55 Insurance Companies registered by the Insurance Regulatory Authority as at February 2017.The study obtained primary data from interviews from all the 55 registered insurance companies in Kenya as at 2017. Primary data was collected with the aid of a questionnaire sent to respondent by drop and pick method. The study findings established that fraud has various implications on Kenyan insurance companies including: Increased cost of doing business, direct impact on premium rates, staff turnover due to summary dismissal, closure, huge claim reserve ratios. The study recommends several measures in the fight against insurance fraud as a threat competitiveness as follow: companies to regularly review the laid down policies on fraud as fraud advances in forms and thus there is need for continuous training and research. Also, the government through IRA to ensure that public awareness programmes on the implication of fraud are rolled out in the whole country.