The brazen ways Kenyans defraud medical insurers

Wednesday March 18 2020

Tom Gichuhi, the executive director of the Association of Kenya Insurers, at the body's headquarters Aki Centre in Nairobi in September 2016. PHOTO | FRANCIS NDERITU | NATION MEDIA GROUP


Medical insurance fraud has remained rampant as perpetrators employ various ways to illegally beat and profit from the system.

The situation has been complicated by the fact that many of those involved are experts in the industry. Meanwhile, prolonged court cases continue to delay the recovery of the stolen funds, which account for up to 30 per cent of the industry’s total revenue.

Underwriting losses for the industry doubled to Sh1.1 billion in 2018 compared to the previous year, with only six insurers posting a profit during this period.

Many of the insurance companies became focused on revenue generation and failed to adequately invest in their fraud investigations departments; others have simply ignored their recommendations.

These departments carry out investigations, provide evidence, recommend that the insurer stops doing business with certain persons or service providers who abet fraud but management refuses to cancel the contracts.

Some staff facilitate fraud, but get away with it because of their relationships with managers.


The numerous fraud schemes employed by fraudsters, and their increasing brazenness, have now alarmed players in the sector with the Association of Kenya Insurers (AKI) — the insurers lobby — announcing this month that it is reviewing the pricing of medical bills at a number of undisclosed hospitals.

This follows revelations that the Nairobi Women’s Hospital had inflated bills to optimise profits. The hospital has since been exonerated by the Kenya Medical Practitioners and Dentists Council (KMPDC) on this accusation.

“We want to come up with a broader strategic direction on how we engage service providers going forward. If we find those who can’t reform, we will not fail to take the punitive action of blacklisting them,” AKI Executive Director Tom Gichuhi said.

AKI believes that blacklisting will hurt errant hospitals and force them to end the fraud.

KMPDC has resolved over 1,164 complaints between 1997 and this year. Others are still pending.

Mr Genson Mbae, the head of investigations and security at Minet Brokers, said some hospitals claim payment for services they did not offer.

“A hospital will claim it had an inpatient case who underwent surgery, so many tests, and then raise a Sh100,000 claim, yet that person was attended to in the outpatient,” Mr Mbae said.

In some cases, fraud is committed through collusion. An agreement with the hospital facility, for example, will see a family of five admitted to the facility on different dates within a very short time, yet there was no disease outbreak to make this possible.

Group Senior Forensic Officer at UAP Old Mutual Zakayo Mwangi says individual victims of the fraud are subjected to unnecessary or unsafe medical procedures, which can result in countless negative irreversible outcomes. Others are subjected to over-diagnosis and over-prescription, to the advantage of the service providers.

Some patients have their medical records compromised, or legitimate insurance information is used to submit falsified claims.

“Two ‘patients' with the same condition were sent to a local hospital to seek treatment, but when they returned, the one who had insurance cover was billed higher than the cash payment patient. This is not acceptable,” Mr Mwangi added.

Doctors have also been engaging in fraud by colluding with pharmaceutical firms to fleece health insurers.

Mr Mbae says that in cases of collusion, patients are often reluctant to give investigators the necessary information, and if they are not working, it becomes impossible to check whether the person was working on the day they are alleged to have been admitted. Hospitals also fail to cooperate and hide records.

“Admission over the weekend and discharge on Sunday afternoon or Monday morning is a challenge. The same applies to holidays. Investigators are unable to verify whether one was at work or genuinely admitted,” Mr Mbae says.

Should the investigations prove fruitful, with a high chance of prosecution and conviction, the parties involved compromise the patient. The problem: “This money does not go back to the insurer, who then ends up paying the claim yet it was fraudulent,” Mr Mbae adds.

Pursuing cases in court has been a challenge for insurance as they take long to be heard and determined.

“When you have third parties as witnesses and they are not benefiting directly in the case, it becomes practically impossible for them to keep attending court for years,” Mr Mbae says.

They lose interest in the case and the insurer ends up losing the case.

Medical fraud has also been manifested in cases where card holders use them to pay for the treatment of relatives who are not covered. They show up at a medical facility and provide their biometric details while the treatment is administered on the sick relative who is not covered.

In other cases, those with chronic conditions buy cover and fail to reveal their status. After they pay premiums for a short while, they seek treatment that costs millions.

Since medical insurance covers one year and has to be renewed thereafter, some people make sure that they exhaust the cover before expiry. Where such cover is funded by the employer, renewal costs more, making it expensive to the employer.

Jubilee Insurance Head of Security Kiplimo Kebenei said most insurance companies have manual records since documents have to be signed, making it easy for them to be misplaced or tampered with.

He said there is a need for insurers to embrace technology and create a central platform to monitor the whole system and data entry in real time. Through this, it will be possible to monitor the various policies and client details.

“With such a system, we can identify policy holders who share the same national identity card. They will simply be flagged by the system even when they have different names.

“It will also tell how many policies a person has, and it is easier to detect fraud. With a single platform, you can know how many claims a person has lodged,” Mr Kebenei said.

According to Mr Mwangi, consumers of health insurance should work with insurers in the fight against fraud by keeping their health insurance and personal information safe and questioning care providers on procedures or billing items they don’t understand.

They should also seek different opinions about some treatments and report fraud.

In November last year, Mr Emmanuel Ojuki Otieno was convicted after he was found guilty of presenting a forged medical card, prescription and claim form in order to obtain medication.

“This was an attempt to obtain by pretence because the accused was not under a medical cover issued by Jubilee Insurance and was impersonating a person called Justus Nyanchoka who may have had a genuine cover in order to get the drugs,” Senior Principal Magistrate Bernard Ochoi stated in his judgment.

Due to fraud, most insurance companies have a Sh10,000 limit on drugs per day. Anything above this amount is only allowed with prior authorisation from the insurer.

Mr Ojuki had wanted drugs worth Sh15,226, making pre-authorisation necessary. He was arrested after the insurer notified the hospital that his claim was fraudulent.

Tomorrow: The role unscrupulous advocates play in the fraud.