Motor Insurance Tops Fraud Cases in Kenya as IRA Tightens Oversight

Fraud Landscape: Motor Insurance in the Spotlight

Kenya’s insurance sector has once again found itself grappling with persistent fraud, with motor vehicle insurance emerging as the leading category of abuse. A report by the Insurance Regulatory Authority (IRA) shows that in the first half of 2025, the Insurance Fraud Investigation Unit (IFIU) received 85 reports of suspected fraudulent claims, of which 45 involved motor insurance. This trend mirrors historical data, confirming that auto coverage continues to be the easiest target for fraudsters (Eastleigh Voice).

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The schemes are familiar: fake accident claims, forged insurance certificates, falsified theft reports, and fabricated medical bills tied to accident coverage. The scale is staggering — over the past five years alone, Kenya has recorded 971 fraud cases, with motor insurance at the core.

Trends Over Time

While fraud dipped by 15.6% in 2024 — with 184 reported cases compared to 215 in 2023 — the five-year data tells a different story. Fraud reports stood at 150 in 2022, 124 in 2021, 130 in 2020, and 83 in 2019. The trajectory underscores the systemic challenge: a problem that ebbs and flows but never disappears.

This persistence has a cost. Insurers often pass the burden of losses onto honest customers through higher premiums, reduced benefits, or stricter claim scrutiny. It erodes trust in insurance products and keeps penetration rates in Kenya below the global average.

Complaints on the Rise

Fraudulent claims are not the only headache. The IRA’s latest quarterly data shows that between March and June 2025, 423 consumer complaints were lodged with insurers. Of these, nearly 79% were in the general insurance category (motor, property, health), while 21% related to long-term products such as life policies. Yet, only 259 cases had been resolved by the end of the quarter.

Complaints reached the regulator through multiple channels, including email, postal services, toll-free hotlines, walk-ins, and even social media platforms like X and Facebook. The wide array of channels illustrates both improved accessibility and rising consumer frustration.

Fraud Schemes Beyond Motor Cover

While car insurance dominates, fraud is more widespread:

• Health insurance scams — fake or inflated hospital bills, phantom treatments, and collusion with rogue clinics.
  
• Agent theft — diversion of client funds by insurance intermediaries.
  
• Ghost dependents — adding ineligible beneficiaries to group health plans.
  
• Life insurance manipulation — criminals abusing long-term products by registering policies, making premium payments, then cancelling or cashing out to disguise illicit funds.
  

These schemes undermine the financial health of insurers and distort the market for legitimate players.

Crackdown: IRA’s Anti-Fraud Measures

In response, the IRA has rolled out a package of reforms:

1. Digital Motor Certificate Verification – to curb forgery and enable police to authenticate certificates instantly.
   
2. Enhanced Monitoring of Agents – stricter oversight of intermediaries who have historically been weak points in fraud chains.
   
3. Police Training – empowering traffic officers and detectives to detect fraudulent claims and spot forged documents.
   
4. Public Awareness Campaigns – educating Kenyans on how to detect fraud, verify insurance documents, and report suspected cases.
   

The regulator has also pushed for stricter anti-money laundering (AML) and counter-terrorism financing (CFT) controls. Insurers must now conduct independent annual reviews of their AML/CFT systems, particularly around politically exposed persons (PEPs), cross-border transactions, and complex investment-linked products. These reviews, due by January 31 each year, must be submitted to the IRA with board-level sign-off and clear remedial actions.

The new requirement shifts accountability to the boards of directors, ensuring that oversight is not just a compliance box-ticking exercise but a governance responsibility.

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FATF Grey-Listing Adds Pressure

Kenya’s renewed focus on compliance is partly driven by its placement on the Financial Action Task Force (FATF) Grey List in February 2024. The FATF cited weaknesses in financial oversight and warned that Kenya’s systems risked enabling money laundering and terrorism financing.

Grey-listing carries reputational damage. It raises the cost of cross-border transactions, makes it harder for local banks and insurers to access correspondent banking relationships, and can deter foreign investment. As a result, regulators like the IRA have been compelled to tighten rules across insurance, banking, and securities sectors.

For insurance specifically, long-term products are seen as particularly vulnerable. Policies with cooling-off periods, top-ups, and surrenders can be exploited to recycle dirty money into seemingly legitimate payouts.

Industry Impact: Profitability Amid Decline in Fraud

Interestingly, the crackdown has shown results. In late 2024, fraud cases fell sharply just as industry profits soared. Post-tax earnings for insurers nearly quadrupled to KSh 52.1 billion, up from KSh 13.3 billion the year before. Analysts attributed the jump to stricter supervision and improved collaboration between the IRA, IFIU, and insurers (Kenyan Wall Street).

Still, the first half of 2025 shows fraud creeping back. If not curbed, the gains of 2024 could unravel.

Comparative Global Context

Kenya is not alone. Globally, motor insurance fraud is the most common type of insurance abuse. In markets like India and South Africa, staged accidents and inflated repair bills cost billions annually. In the UK, the Association of British Insurers estimates fraud costs over £1.1 billion annually, with motor claims dominating.

Health fraud is another global plague. In the U.S., the National Health Care Anti-Fraud Association estimates $68 billion annually is lost to health insurance fraud.

To fight back, countries are adopting insurtech solutions:

• Blockchain-based verification for motor certificates
  
• AI-powered fraud analytics that flag suspicious claim patterns
  
• Cross-industry databases where insurers share blacklisted individuals or agents
  

Kenya is beginning to follow this path, but adoption remains slow.

Why Fraud Persists

Fraud thrives in Kenya’s insurance sector because of:

• Low penetration rates — with fewer people insured, fraud goes undetected more easily.
  
• Weak enforcement history — prosecution rates for fraud remain low, emboldening criminals.
  
• Collusion — between agents, claimants, and service providers such as garages or clinics.
  
• Economic pressure — high unemployment and rising living costs make fraud a tempting shortcut for some.
  

What This Means for Consumers

For policyholders, fraud translates into higher premiums and stricter claim scrutiny. Insurers facing heavy losses are more likely to raise prices or reduce benefits. Some customers lose trust and abandon insurance altogether, worsening penetration challenges in a market already struggling to expand coverage.

The IRA has urged consumers to play a role: verify insurance policies through official platforms, avoid unscrupulous agents, and report suspicious claims.

Looking Ahead: Key Priorities

The fight against insurance fraud in Kenya will hinge on:

1. Technology Adoption – insurers investing in AI, blockchain, and real-time data sharing.
   
2. Law Enforcement Partnerships – stronger collaboration with police and prosecutors to ensure fraudsters face consequences.
   
3. Public Trust – building consumer confidence through transparency and faster complaint resolution.
   
4. FATF Compliance – sustained reforms to move Kenya off the Grey List and restore its international reputation.
   
5. Market Discipline – insurers tightening underwriting standards, agent vetting, and customer KYC checks.
   

Conclusion

Motor vehicle insurance remains Kenya’s most fraud-prone sector, draining industry resources and burdening honest customers. The IRA’s latest report is both a warning and a call to action: without decisive reforms, fraud will continue to undermine insurance penetration, profitability, and trust.

But there are reasons for cautious optimism. Stricter AML/CFT rules, digital verification tools, and improved fraud detection mechanisms are being rolled out. If Kenya sustains the momentum — and backs it with stronger enforcement — it could turn a perennial challenge into a milestone in sector reform.

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By: Montel Kamau

Serrari Financial Analyst

24th September, 2025