Fraud threatens health insurance

Doctors and health providers are colluding to drain the health insurance sector of billions of shillings and could kill the industry unless the malpractice is curbed, providers have warned.

They said that the scandal unfolding at the National Hospital Insurance Health Fund (NHIF) is just a tip of the iceberg.

According to industry stakeholders, the losses being incurred by companies offering medical cover is on a steady rise and far outstretches globally accepted levels.

In 2010, for example, a company offering medical insurance was 85 per cent likely to incur a loss on the policy against the globally accepted standard of 50 per cent risk ratio.

Kenya Reinsurance managing director Jadiah Mwaraniah said the medical insurance industry has now become the target of fraudsters, who are colluding with doctors and medical facilities to siphon funds from medical scheme providers.

A government medical scheme for civil servants has raised questions about Sh4.2 billion that was disbursed in just under three months and has seen the entire board and chief executive shown the door.

“Some insurance firms have now employed their own nurses and medical practitioners to verify prescriptions and medications since it is emerging that some of the drugs and ailments are incongruent and do not even exist,” said Mr Mwaraniah.

Record losses

The prescriptions only serve to increase insurance costs that have seen the health insurance segment of providers record losses.

The Association of Kenya Insurers (AKI), the industry lobby group, said the situation is expected to worsen if operations are not streamlined to stem further losses.

The latest available figures show that the insurance industry recorded losses of over Sh530 million in 2010, a situation aggravated by the high amounts that go to settling medical claims.

Data from the Kenya Association of Manufacturers indicate that medical insurance has the highest loss ratio of 81.5 per cent compared to other business lines.

In spite of a review that saw medical premiums reach Sh7.4 billion in 2010, the industry ended up with a loss of Sh530 million.

The segment had returned a loss of Sh236 million in 2009 out of the Sh5.9 billion premium it collected over the period.

Firms that underwrite medical insurance said they have been forced to turn down mega deals because medical claims consistently exceed the segment’s premiums.

“We are cautious about the kind of business we accept because losses have so far defied upward review of premiums,” said Mr David Ronoh, general manager in charge of medical insurance at CIC Insurance.

This is not new to the insurance sector, which seems to attract fraudsters in all its segments. The past decade saw several public service vehicle insurers collapse.

In 1996, the then state-owned Kenya National Assurance Company succumbed under the weight of fraudulent claims and mismanagement, becoming the first company to go under.