Evaluation of fraud management strategies adopted by insurance companies in Kenya
Insurance is important in the development of modern economies including Kenya’s. This is because insurance is a mechanism through which losses are replaced thereby facilitating sustainable economic development. Over the years, fraudsters have realized that the insurance industry is highly liquid and permeable to fraud and have proceeded to invaded the industry with high intensity and unless urgent and stringent actions are taken by individual insurance companies, the industry regulator, industry associations and the Government, the industry runs the risk of further weakening of its already fragile liquidity and as a result compromising its claims settlement ability, performance and ultimate stability. Some Kenyans involve in fraud partly because they feel the premiums they pay are lost or because fraud is a victimless crime as nobody in particular is directly affected. A survey was conducted among 25 of the 50 insurance companies to establish specific fraud management strategies in use and evaluate their effectiveness. Data was collected, coded, analyzed using descriptive statistics and presented. The study established that insurance companies use normal internal control systems such as internal and external audit functions, underwriting, claims management, IT and management committees to manage fraud. The study established that strategies adopted by insurance companies to combat fraud are ineffective leading to increasing cases and cost of fraud. That most companies shy away from investigating and prosecuting suspected fraudulent claims exposing this weakness to fraudsters who exploit it to their advantage. The study recommends that urgent action be taken by the Government and its agencies, IRA, as well as individual insurance companies and their associations if they are serious about saving the industry from the pangs of fraudsters.
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