Motor Insurance Fraud in Kenya: an Analysis of the Effectiveness of the Legal and Institutional Framework in Curbing Insurance Fraud

Abstract

This study sought to analyse the effectiveness of the existing legal and institutional framework in curbing motor insurance fraud in Kenya. The study establishes whether there’s need to review the current Insurance legal and institutional framework as a whole and whether the amendments arising from the Insurance (Amendment) Act of 2019 were adequate. The Insurance industry is a creature of the law as an insurance contract is a legally binding and enforceable contract between two individuals, the insurer and the insured. Bearing this in mind, the triumph or collapse of the insurance business is significantly dependent on the legal and institutional structure. This is because the legislation and institutional scaffold provides institutional and corporate governance regulations, market conduct regulations, enforcement regulations and other regulations and guidelines that are not within the scope of insurance but that affect insurance stakeholders. The Insurance industry will thrive where the law is effective with reference to the regulatory and supervisory aspects. Insurance in Kenya is regulated by the Insurance Act (Amendment) 2006, CAP 487 of the Laws of Kenya. The Insurance Regulatory Authority is the legislative government outfit that is created by the Act control, manage and develop the insurance industry. Its goals are to endorse the awareness of consumers, their protection, inclusivity, competitiveness and ensure the stability of the industry so that it can deliver quality and effective client service to consumers. This study also devolves into the roles of other key institutions involved in monitoring, evaluation and enforcement of insurance matters that include the Insurance Fraud Investigation Unit, the Judiciary and the Office of the Director of Public Prosecution. Overall, it was concluded that the legal framework in place before enactment of the Insurance Amendment Act, 2019 had succeeded moderately in curbing insurance fraud. The Amendments on the other hand, revealed a progressive stride towards strengthening not only the legal framework but also the institutional framework which the study concluded provided a weak link .. The study recommended that the more attention should be drawn to the institutional framework to contain insurance fraud steadily .These recommendations included; enforcement of the Insurance Amendment Act, 2019 in terms of granting the IRA autonomy in management of the Insurance Industry, provision of technical training to personnel involved in monitoring and enforcement of insurance fraud, increase in capacity of personnel at the IRA

dealing with insurance fraud, training of other stakeholders such as prosecutors, judicial officers, and the public on insurance and its elements of fraud .