Insurers bleed as fraud rocks sector

Kenya's insurance industry is facing a fraud crisis, which is threatening both private underwriters and the government’s Social Health Authority (SHA) scheme.

From exaggerated or faked accident claims and forged medical reports to ghost beneficiaries, including institutions and individuals, fraudsters have continued to milk companies of billions as they exploit gaps in oversight and collusion with insiders.

In August, the Ministry of Health suspended 40 health facilities across the country after uncovering widespread fraudulent claims to SHA, in what Health CS Aden Duale described as a “grave threat” to the sustainability of Kenya’s universal health coverage agenda.

The suspensions, which were published in Kenya Gazette No. 168 of August 7, 2025, followed a month-long forensic audit of SHA’s digital health system, which flagged suspicious claims estimated at Sh10.6 billion.

The private sector also remains exposed to fraud, with experts warning that it could dampen the insurance sector’s financial stability and negatively impact the sector, which is struggling with a country penetration rate of below three per cent.

In the first quarter of 2025, Kenyan insurers rejected Sh658.9 million in claims – a staggering 77.6 per cent increase from the same period in 2024. This wasn’t just a minor uptick; it represented 22,364 denied claims across all insurance categories.

The situation is so bad that investigators from the Insurance Fraud Investigative Unit (IFIU) are following up on a case where a middle-aged man enrolled four members of his family for a life cover and later faked their deaths to obtain claims from an insurance firm.

In 2024, there were 185 fraud cases reported to FIU; 82 cases were pending under investigation, 25 pending before court, 30 cases pending arrest with the accused known, while 10 cases of fraud were finalised.

Up to June this year, 68 cases were reported, 41 pending under investigation, 12 pending before the court, four cases pending arrest with the accused known, while 11 cases of fraud had been finalised.

An officer at the unit told the Star that such cases are on the rise, having grown by almost fivefold since 2018, when Evans Kasyoki Masaku, former ICEA Lion Group company manager, was charged for the murder of his nephew to benefit from a Sh9 million insurance policy.

According to Insurance Regulatory Authority (IRA) chief executive and commissioner of insurance, Godfrey Kiptum, there has been an increase in fraud cases involving professionals, including lawyers, doctors and even police officers.

“Fraud has been a big problem in our sector, and especially fraud of public service vehicle insurance. We have places in this country that are hotspots, Machakos and Malindi are leading. We also have cartels led by very senior people in the legal profession,” Kiptum said during a recent journalists’ forum in Naivasha.

According to the FIU, cases of scams have been reported in false injury claims, funeral, death and medical claims, theft by agents, impersonation, double registration, motor vehicle theft claims and fraud committed by advocates and auctioneers.

Others include forgery, altering documents and making false documents and faking motor vehicle insurance certificates.

A top executive of one of the leading insurance firms in Kenya told the Star in confidence that the sector is underreporting fraud cases.

"Two in five life policy claims are pure fraud. At least half of the motor, fire and injury claims have traces of conmanship. The situation is worsened by corrupt brokers, police officers, lawyers and even employees."

He said that although some of those cases can be traced, the prosecution and general judicial process in the country is tiring, forcing firms to shoulder costs.

“Challenges in combating fraud include reluctance by some insurers to pursue criminal cases; difficulty in reconstructing crime scenes due to delayed reporting and witness relocation.”

Motor vehicle fraud in Kenya occurs through various means, including auto dealer scams like tampering with odometers or misrepresenting a car's condition and theft scams involving theft from parking lots, car-hire scams and robbery.

Scammers also file false claims for stolen or damaged vehicles, or create fake claims by insuring a vehicle after it has been sold. Additionally, there are cases of using irregularly registered vehicles that do not comply with import rules and have unpaid duties.

Medical insurance fraud in Kenya happens through various schemes, including healthcare providers billing for services not rendered or for more expensive treatments than provided, and patients or providers colluding to use one person's credentials for fraudulent claims.

It can also involve identity theft, where fraudsters use stolen personal details to obtain insurance or make claims and agents or brokers who embezzle premiums.

In response, insurers are implementing new anti-fraud measures, including digital verification and AI-driven systems for fraud detection.

Jubilee Holdings blocked Sh400 million in fraudulent claims in 2024 alone using AI – an 86 per cent improvement from 2023.

Experts are hopeful the technology will save firms from fraud, as scammers get more sophisticated.

“Kenya’s insurance sector is undergoing a technological revolution that’s simultaneously exposing rampant fraud and enabling unprecedented legitimate payouts. While the rejection numbers seem alarming, they signal an industry maturing in its defences,’’ said Collins Otieno, an underwriter at a local insurance firm.

The Association of Kenya Insurers notes that the challenge, however, is that insurance fraud is hard to identify and it is estimated that the number of detected fraud cases represents only a small percentage of the actual cases.

“Insurance fraud is a big concern and various insurance stakeholders, including insurers, regulators and insurance associations, are making a concerted effort to prevent fraud,” AKI notes in a recent industry report.

Kenyan insurers rejected Sh658.9 million in claims in the first quarter of 2025, a 77.6 per cent year-on-year increase.

Despite rejections, the industry paid out Sh53.24 billion in Q1 2025, a 22.7 per cent year-on-year increase.

Motor insurance accounts for over 60 per cent of fraudulent claims, costing honest policyholders millions annually.

Medical insurance in public is also a concern with billions of shillings feared to be lost every year, siphoned off to non-existent facilities, while many genuine hospitals remain underfunded and poorly equipped.

Global financial services provider, Sybrin, notes that fraud is a significant and complex challenge in Kenya’s insurance industry, particularly in the short-term (general) insurance lines like motor, property and travel insurance.

“Fraudulent claims not only drain insurers’ finances but also lead to higher premiums for honest customers and erode public trust in insurance,” it said.

According to the firm, an estimated 25 per cent of insurance industry income may be fraudulently claimed, with roughly 30 per cent of motor insurance claims and 40 per cent of medical claims deemed fraudulent.

Such staggering figures underscore the urgency for robust fraud detection and prevention measures.

The industry comprises 59 insurance companies, five micro insurance companies, five reinsurance companies, 237 insurance brokers, 25 bancassurance intermediaries and about 15,000 insurance agents.

The industry is segmented into long-term (life) and short-term (general) insurance, with a notable dominance of the market by the short-term business in terms of premium at 52 per cent.

The industry comprises 59 insurance companies, five micro insurance companies, five reinsurance companies, 237 insurance brokers, 25 bancassurance intermediaries and about 15,000 insurance agents.

The industry is segmented into long-term (life) and short-term (general) insurance, with a notable dominance of the market by the short-term business in terms of premium at 52 per cent.