THE EFFECT OF FRAUDULENT PRACTICES ON THE GROWTH OF THE INSURANCE INDUSTRY IN KENYA: A CASE OF SELECTED INSURANCE COMPANIES

Abstract

The aim of this report was to investigate the level of fraud in the insurance companies and how it is affecting growth of the industry. CFC Life, Britam and Jubilee Insurance companies are all headquartered in Nairobi with various branch networks all over the country. The research was geared to determine if high levels of fraud among the representatives of the companies and/or clients is the major contributor to the slow growth process of the insurance sector, which has seen litigations, loss of jobs and low public confidence in its importance as a key economic growth factor.

The study sought to analyze the effect of fraudulent practices on the growth of insurance as the background of the problem by following up on the causes of fraud in the insurance companies under the study and how it is affecting their reputation. The report further justified the study and its significance as fraud is one of the major vices that we have in society and no effort should be spared in finding out how best to handle it especially among the major companies and areas that it is prevalent. In the report, limitations of conducting the study were also put on perspective and how the researchers countered the limitations.

A rich review of literature was done by studying materials already done by other people; by reading newspapers, books, internet, comparing this work with fraud activities reported in other regions and analyzing fraud reports that have a particular reference to the study.   The study compared insurance fraud in Kenya and the developing countries. It also pursued the impact of fraud on the economy of the country.  Causes of fraud in Kenya were also examined and the initiatives the governments should introduce or reinforce to curb this problem.

Survey research design was used in the study and a representative sample size of 290 selected to represent the whole population. Stratified sampling technique was used to get the respondents and questionnaires were employed to gather primary data as well as interviews among the different insurance companies to get the coherent picture on the fraud situation on the ground. Data collected underwent four processes of analysis to make it easy to compare and contrast and also to enhance operation of mathematical manipulation.

This research work is important as the data received helped in recommending the steps to be taken to curb fraud and evaluate the effectiveness of the mechanism put in place to guard against fraudulent incidences in the companies that offer insurance. It will also be used as a measure to determine the level of confidence that the people have in taking up insurance products. Further to these, the report sought to establish if adequate resources and efforts are put in place to fight fraud as well as the recognition and comprehension of the effects of fraud by the insurance company’s management teams.

Key Words: Fraud, Industrial Growth, Insurance Sector