Insurance Fraud Risk Management and Financial Performance of General Insurance Firms in Kenya

Abstract

General insurance firms in Kenya have continued to display declining performance in the recent years. In the recent years, majority of the fraud cases in the insurance industry occur in the general insurance category. The objective3of this research was3to determine the relationship between fraud risk3management on financial3performance of General insurance3firms in Kenya. This study3adopted a causal-descriptive3research design. The study3targeted the general insurance firms in3Kenya. This research included 32 general insurance firms that operated between 1st January 2016 and 31st December 2020. The study was based on secondary3data sourced from the3annual financial3reports of individual3firms. The data was3collected using data collection schedule. This research used quantitative data analysis methods of descriptive and inferential analysis. The statistics will be generated using SPSS version 25. The researcher undertook a correlation analysis to establish the relationship3between fraud3risk management and financial3performance of general insurance firms in Kenya. From the outcome, fraud loss ratio had a weak3significant negative relationship3with financial3performance. This indicates that fraud risk has a negative relationship with financial performance. Leverage as measured by the ratio of deferred insurance liabilities to equity showed a weak negative correlation coefficient. Firm size showed a strong significantly positive correlation coefficient. The findings conclude that fraud risk management has3a weak positive3significant relationship with financial performance of general insurance firms in Kenya. Leverage on the other hand has a negative significant relationship with financial performance of general insurance firms in Kenya. Firm size has a strong significantly3positive relationship with financial3performance of general insurance firms in Kenya. The study3recommends that general3insurance firms3in Kenya come up with fraud risk management strategies that would reduce the fraud risk ratio in the firms. This research also recommends that financial3performance of general3insurance firms in Kenya need to reduce the3levels of deferred liabilities and increase the level and value of assets within their3`firms.