Challenges in management of general Insurance claims in Kenya

Abstract

General Insurance companies underwrite homogeneous policies. The product a customer purchases from an insurer is peace of mind, based on the promise the insurer makes to him that he will be compensated in the event of happening of the insured peril. Thus, claims processing is a central service in an insurance company. The objective of this study was to determine main challenges faced by General Insurance companies in claims management. The study adopted a survey research design where the population of interest entailed all General Insurance Companies in Kenya. Data was collected through the use of a structured questionnaire. Questions were both closed ended and open ended. The open ended questions gave the respondents an opportunity to add more information which could otherwise not be revealed through closed ended questions. The data collected was arranged systematically and coded to facilitate analysis. The data was then analyzed using descriptive statistics. From the findings, weak underwriting standards form the highest challenge in management of General Insurance claims in Kenya. At the same time, there is a high level of fraud in the Kenyan General Insurance Industry. It is clear that claims departments are more likely to find it necessary to investigate a claim when circumstances of accident are unclear and when vehicle is not valued prior to commencement of cover. Claimant advocates and agents/brokers are the ones highly used to perpetrate fraud. Moreover, delay in reporting a claim and high work load of staff were the main factors found to contribute to delay in claim payment. The study recommends that policy makers in the insurance industry, including the Insurance Regulatory Authority (IRA) as well as the Association of Kenya Insurers (AKI) should formulate and put into force policies that would effectively reduce or even completely eliminate weak underwriting standards. At the same time policies should be formulated to ensure that proper procedures are followed at inception of cover. It is especially important to enforce valuation of motor vehicles prior to commencement of cover, to reduce the need to investigate claims which may later arise. Other recommendations the study makes are creation of a police unit to deal with insurance fraud and special courts to handle fraud-related charges. It is also recommended that the insurance industry lobbies for implementation of structured compensation for both motor injury and work injury claims.