Relationship Between Fraud and Financial Performance of Insurance Companies in Kenya

Abstract

The purpose of this research was to study the relationship between fraud and the financial performance of insurance companies in Kenya. Fraud was the independent variable which was measure using the number of Fraud cases that were reported between the year 2011 and 2015 and the amount of money that was lost in each case through insurance fraud. The financial performance of the insurance companies was the dependent variable and was measured using the Return on Assets (ROA) ratio. The study targeted those insurance companies that had high cases of insurance fraud and had lost money through these cases. The study established that fraud among insurance firms in Kenya has been on the increase and this was evident from the increasing number of reported cases between 2011 and 2015. Some insurance firms have fewer number of reported fraud cases whereas others have large numbers of the reported fraud cases. The amount lost due to fraud also differed greatly from one firm to another where some firms lost small sums of money whereas other lost large sums of money. There existed statistically significant relationship between the amount lost and the financial performance of the insurance firms.