How lawyers collude to steal from insurance companies

An accident scene near Nangili trading centre along the Eldoret-Kitale road. JARED NYATAYA | NATION

Unscrupulous lawyers have been defrauding insurance companies of millions of shillings through fake claims.

As a result, the Law Society of Kenya (LSK) has disbarred a number of lawyers.

LSK President Allen Gichuhi said that under the Advocates Act, erring lawyers are prosecuted and still appear before the LSK disciplinary tribunal.

“If it’s found that some lawyers are involved in fraud, the disciplinary tribunal has the option of striking them off the roll of advocates or order them to refund the money,” Mr Gichuhi said.

He said that there is a backlog of cases and sometimes those filing complaints have to wait for long to get redress.

SERVICE WEEK

LSK plans a customer service week to help speed up clearing of pending matters,” Mr Gichuhi said.

Insurers have identified some of the strategies lawyers use to fleece the industry.

In 2017, insurance companies joined hands to form the Security and Fraud Investigators Committee (SFIC) to deal with swindling.

The committee groups UAP Old Mutual Group, Jubilee Insurance, Britam Insurance Company, CIC Insurance Group and AON Minet, among others.

The Association of Kenya Insurers (AKI), the insurers’ lobby, has accepted SFIC as one of its committees.

THIRD-PARTY CLAIMS

Most fraud is related to third-party claims. These are liability claims brought by persons allegedly injured or harmed by the insured. The insured is the first party, the insurer is the second party, and the claimant the third. These type of claims, lodged as fatalities or injuries, often end up being inflated.

Forgery often starts at the occurrence book (OB) register at police stations.

It is virtually impossible for an insurance company to challenge the authenticity of a police abstract, which is prepared using details contained in the OB.

Mr Kiplimo Kebenei, the SFIC chairman, said that individuals conspire with lawyers and police officers to alter details of police abstracts after accidents.

The advocate then issues a notice on intention to sue the insurer. The notice is often delivered to the insurer just a day before the expiry date. The insurer, therefore, does not have sufficient time to prepare a response.

Some lawyers are not even known to the company and purport to represent employees in the firm.”

The lawyer, who often represents both genuine and fake claims, then goes to court.

The insurer is issued with summons to appear before court. The victims’ lawyer is quick to propose to the insurer’s lawyer an out-of-court settlement.

The victims’ advocate knows rates payable for different injuries, hence the claims are settled within set standards for particular injuries and disabilities.

A consent is then entered in court and adopted. Thereafter, delay in payment attracts interest at court rates. The scheme is made possible because in civil claims, the alleged injured persons are not necessarily required to appear in court.

The insurer then settles the claims with the victims’ lawyer.

The loot is then shared between the police who prepared the fake abstract, the lawyer representing non-existent clients, and perhaps the insurance company’s lawyer or officer who facilitated the quick payment of the claims.

Some lawyers file claims on behalf of employees allegedly injured at work.

Investigations show that some of the employees might have left company premises when the accident occurred.

Some companies may not be aware of claims lodged on behalf of their employees.

 “Some lawyers are not even known to the company and purport to represent employees in the firm,” said Mr Zakayo Mwangi, the Group Senior Forensic Officer at UAP Old Mutual Group and one of the pioneers of the Insurance Fraud Investigation Unit (IFIU).

A lawyer who was recently put to task to explain 16 fake claims lodged on behalf of employees responded:

“I represent persons who come seeking my services; if I am told that they no longer need my services, I’ll just close the file.”

'EXPLOIT INJURED'

Rampant fraud in the insurance industry necessitated the establishment of IFIU under the IRA.

“Some lawyers file genuine claims, but after being paid, they exploit the injured by charging exorbitant legal fees. Sometimes money is paid but the injured are not paid,” Mr Mwangi said.

Insurers’ investigations also show that their advocates sometimes collude with their colleagues to steal from them.

A lawyer of an insurance firm, for instance, colludes with the insurer’s employee to prepare a different set of documents and purport that they emanate from court. The company’s advocate then enrols a friend to purport to be the victims’ lawyer.

The documents prepared bear a higher amount of money than what was agreed in court.

PAY FRIEND

The insurer’s advocate then instructs the firm to pay the inflated amount to his friend — the victims’ advocate. The extra money is then shared between the “friendly lawyer” and the insurer’s advocate.

Mr Mwangi said that sometimes names of people who die or are injured in different accidents are sneaked into fresh claims.

In such cases, the money paid to the fictitious claimants is pocketed by the lawyer.

Sometimes people injured in accidents don’t know how to make claims. In such cases, crooks privy to insurance matters may prepare paperwork and lodge claims or ask lawyers to do it on their behalf.

“Most Kenyans don’t know how to make and follow up on claims or don’t bother in case of minor injuries. In this case, insurance insiders often process payment claims,” Mr Mwangi said.

LEGAL DEPARTMENT

Insurance company staff from the legal department also conspire with advocates to prepare claims.

The payment is initiated, processed, and paid even though the actual case may still be pending before court. After payment, the insurer’s staff destroy correspondence and payment documents.

“Once this is done, the insurer may not be able to know whether the claim was previously settled or not. This is because they process several claims on a daily basis,” Mr Kebenei said.

Insurance companies sometimes pay twice or even thrice for the same claim due to such conniving.