Effectiveness of use of biometric technology to curb fraud in medical insurance firms in Kenya

Abstract

It is a common consensus that in the recent past there has been a tremendous growth in the number and value of cases reported involving fraud especially in insurance industry. Medical and Motor insurance business segments – the mainstay of the insurance industry, are said to be making loses as a result of increased fraud cases. AKI 2010 report found that the health insurance sector made the highest loss percentage of 81.5% followed by motor private insurance at 74.9%. This study had an objective of establishing the relationship between biometric technology and fraud in medical insurance firms. Data from year 2013 to 2015 was collected from 18 insurance companies that underwrite medical insurance business. The study adopted descriptive survey and data from insurance firms was collected by administering of a questionnaire. Data on value of fraud cases was collected from Insurance Fraud Investigation Unit. The study findings indicate that the value of reported fraud cases significantly increases with the value of claims authenticated via biometric technology. The main conclusion was that biometric technology has not had a negative impact in curbing fraud in medical insurance companies especially on claims submitted. The reason behind this is that as technology develops fraudster tactics become more advanced and complicated which has seen a rise in other forms of fraud like; cyber fraud, money laundering and internal fraud which cannot be prevented by use of biometric technology. However, it was found that biometric technology has really enhanced service delivery within the medical insurance sector especially by way of managing member benefits this can be shown from the model where there is a negative relationship between fraud cases and gross written premiums from members enrolled on biometric technology. The researcher therefore recommends that insurance companies to strengthen their internal control systems, improve corporate governance structures and ensure that they have internal and external audit functions as these are the key functions that can contain the fraud risk. The researcher also recommends a same type of study to be carried out in commercial banks.