Fraud Risk Management Practices And Financial Performance Of Insurance Companies In Kenya

Abstract

This investigation sought to verify the link between FRM approaches and the financial performance of the 55 insurance establishments in Kenya. This investigation was anchored on a descriptive study design approach. Population of study consisted of the 55 insurance companies in Kenya. The investigation gathered quantitative data from both primary and secondary sources. Diagnostic tests were conducted on the information gathered. Tests to be conducted included heteroscedasticity, multicollinearity and linearity tests. Descriptive analysis methods including mean, and standard deviation were utilized to analyze the population’s demography, organization and the FRM approaches. To verify the link between FRM approaches and financial performance within licensed insurance companies, correlational analysis method was applied whereas multiple linear regression analysis was employed to assess how each of the dependent variable links with ROA. The model summary points out that the coefficient of determination R square to be 0.259. This meant that 25.9% of the variation in FRM was due to the predictor variables captured in the study. In addition, 74.1% of the variation in the datasets was a result of some of the variables that also influenced fraud risk management but were not captured in the study. R is the coefficient correlation was utilized to explicate the link between the investigation variables, therefore the estimate of 0.508 showed there was a moderate link between the investigation variable. Findings from the Anova model shows that the P value projected was 0.033, indicating that the analytical model was fit to predict how the dependent variable, ROA, is determined by preventive fraud risk management, detective fraud risk management and responsive FRM approaches of insurance establishments in Kenya. The investigation proposes that insurance establishments ought to increase their mechanisms of internal control as well as embrace fraud risk management practices to secure their revenue from fraudulent practices that may result from employee behavior and false audit reports. In addition, the study recommends that efforts ought to be placed by insurance establishments to enhance early detection of fraudulent practices and curtail them before they negatively influence the performance of the insurance establishments. The investigation also proposes that insurance establishments ought to integrate the use of fraud detecting technology to carefully trace the occurrence of fraudulent practices that incur losses to the company. The technology can leverage the company’s losses through the formulation of tech solutions that can reduce the chances of the occurrence of fraud. Technology can provide easy means of regulating the incidences of fraud and thereby boosting the financial performance of the insurance establishments