Nature of Fraud and its Effects in the Medical Insurance Sector in Kenya

Caren B Angima, Mbala A. Omondi


 Insurance fraud is a major challenge facing the insurance industry both in the developing and developed world. This vice has no doubt existed wherever insurance policies are underwritten and takes different forms depending on the economic time and coverages available. However, the validity of this claim has hardly been established empirically in Kenya. It is important that the insurance players in Kenya understand the nature and effects of insurance fraud and at the same time come up with strategies to counter the same. In this regard, the study objective was to investigate the nature of fraud and its effects in the medical insurance sector in Kenya and also establish possible solutions in countering the vice. The study adopted a descriptive research design where each of the twenty eight registered medical Insurance providers and twenty Insurance companies underwriting medical insurance in Kenya formed the sample frame of forty eight firms. A questionnaire was the main research instrument in which one questionnaire was dropped and later collected from the firms. The study findings revealed that majority of the firms sampled had experienced different levels of fraud in the recent past with the fraud form ranging from overstated medical bills, concealment of medical history of the patient, fraudulent identity / impersonation, document theft fraud as well as perpetration of the insurance premium fraud. The level of fraud was found to depend on the existence and extent of automation that the firms had adopted. The effects of fraud lead to increase in the cost of medical insurance and tarnishing the image of the insurance industry. The study identified different solutions to manage the level of fraud including subjecting medical bills to extensive audit to determine their validity as well as automation of the processes, making it mandatory for clients to produce their smart-cards in any medical facility before receiving services, and also maintaining a database of all insureds within the organizations’ network. Other strategies include restriction of unauthorized employees in accessing client information, educating the staff to uphold ethical practices and offering a better remuneration and friendlier work environment to them. This study contributes to a partial understanding of the reasons for medical covers being expensive and the negative image of the insurance industry.

Key words: Insurance Fraud; Medical Insurance Sector; Insurance Image

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