Thousands of accident survivors and victims' relatives are holding onto hollow hopes of compensation by insurance companies, as a cartel continues to steal their cash in a fraudulent scheme masterminded by rogue lawyers and insurance insiders.
Law firms in collusion with employees of some insurance firms have crafted a racket that leaves the claimants and their lawyers pursuing cases in court long after the claims have been processed and handed to the wrong people. The fraudsters are fleecing insurance firms of millions of shillings in fake claims.
Once a claim has been filed in court, the insurance insiders collude with the lawyers representing the insurer to make a fake change of advocates and slide it into the claim file. The new advocate then pockets the hefty compensation supported by a fake judgement and award which the survivor, their lawyer and even the presiding judge has no idea about.
The real case then proceeds through a slow process and the claimant only realises they have been chasing the wind when they present the claim to the insurer, usually when it is too late. Several insurance firms have fallen victim to the lawyer-aided fraud, with some becoming claimants in cases they have no idea about and giving heavy kickbacks to legal officers in insurance firms.
Underwriters who spoke to the Sunday Nation in confidence said some firms have lost as much as Sh50 million to the fraudsters in one year.
Jubilee Insurance Kenya, which has identified the rogue law firms and its staff involved in the scheme - and sealed the loophole - said the fraud is not easy to detect because the real claims sometimes come three years late and the files can be mutilated.
Jubilee's head of security, fraud and investigation Kiplimo Kebenei said the firm has had about 25 cases, all discovered after execution, within three years.
"We noticed the trend where victims were presenting judgements to ask for compensation in cases that we had settled long before. Now, we have a rigorous process for verification of all court judgements and we have a maker/checker process to ensure no individual can perform a role from beginning to end. This means that the starter of a claim cannot handle it to completion. It will get approval from a different person, a more senior person or supervisor," Mr Kebenei said.
The firm paid out Sh19.5 million to fake claimants assisted by a legal officer who had registered a law firm to be used in receiving the quickly processed claims.
The officer, who was sacked from the firm, is said to have been leading a flashy lifestyle with high-end cars and a classy apartment on Kiambu Road.
Some cases receive double payments, with both the fake and the real claimant being handed cheques sometimes a year apart. But in many cases, the fake claims are higher than the actual award.
In one such claim in Civil Suit No 626 of 2015, Jubilee paid Sh345,220 more than the genuine court award of Sh600,000 in November 2016, one month before the judgement.
The firm had relied on a fake notice of change of advocates and paid a law firm that had played no role in the court process, according to investigation documents seen by the Sunday Nation.
Several stakeholders expressed shock at the web of fraud, with the survivors waiting for as long as six years to be paid only to realise that they have been waiting for nothing.
Association of Kenya Insurers chief executive Tom Gichuhi termed the news of the racket "shocking".
"It's a well-orchestrated scheme with sometimes an emotional play of a victim almost dying and a judgement handwritten to imply the urgency. The fastest ones are toned down to just a few hundreds of thousands and, in a month or so, the real judgement comes out, then a second cheque is written.
"Many underwriters are not aware about this scheme, but it is among the loopholes through which money is siphoned from insurance firms," said a senior manager in a leading insurance firm.
The manager also accused the Insurance Fraud Investigation Unit under the Insurance Regulatory Authority (IRA) of laxity, noting that some of the cases were reported as far back as 2017 but no action had been taken.
Efforts to interview IRA officials have not born fruit since November last year.
The unit, formed in 2011, is said to have little capacity to handle the rapidly changing fraud tactics despite being funded by the insurance firms.
But IFIU head Ndumba Thangalani said the regulator has elaborate mechanisms to address claims from people who have not been properly compensated by the underwriters, hence the courts should be the last resort.
"The cases should pass through IRA when a company refuses to honour a claim within the consent period. There is a consumer protection department and even a tribunal to hear complaints, beyond which one can go to court. The IRA can even sanction the insurance firms when they fail to honour their obligations, so I don't quite understand how the many cases ended up in court so quickly," Mr Thangalani said.
Fraudsters have been taking advantage of the weak investigation units and lack of data sharing among the players to mint millions through fraud, which is now gobbling up 35 per cent of the insurance industry's income, according to the IRA. Medical claims are the most prone to fraud, followed by motor insurance.
Official data shows that insurers declined 10,690 claims in the quarter to September 2019, with insiders saying fraud was a major contributor to the decisions.