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.
