Group suspected of running insurance fraud scheme

Saturday May 06 2017

A group of young doctors, pharmacists and hospital staff is suspected of running a well organised medical insurance fraud scheme that is bleeding the sector dry and giving investigators sleepless nights.

One arm of the cartel writes fake prescriptions for getting drugs from major hospitals using fake insurance cards then resells them to the market in what has taken fraud investigators more than one year to crack.

The other runs accurate data collection that involves identifying employers with lucrative outpatient and inpatient covers and whose employees rarely get admitted, produce identity documents and use them to admit other sick individuals in high end hospitals at a lesser fee.

Insurance fraud investigators last month stumbled on a case in which a disc jockey (DJ) was involved in a motor bike accident in Nairobi’s Kasarani area and ended up being admitted as a driver at the Office of the Director of Public Prosecutions (DPP) and using the civil servant’s details to get treatment worth Sh650,000.

The DJ admitted by the cartel run by hospital staff, who had identified the driver’s medical cover as a potential for easy attack, was told to identify himself as a driver and was only suspected by caregivers from the insurance company when he had no idea where or what happens at the DPP’s office.



“They asked his mother to pay just Sh180,000 and he got admitted for six days with operations and drugs. When we went to probe him after it emerged he has no idea about his supposed work place, the man feigned memory loss,” an insurance investigator told the Nation in confidence.

The case is currently in court and is just one among many that the investigators routinely encounter. They say the admitted persons sometimes die and the employers shocked when they are informed that one of their own had passed on. The shock and panic is even deeper when the insurers extract the next of kin’s details to inform them their kin had died.

The youthful doctors, some now working in government hospitals, come in handy to write accurate prescriptions that pharmacist would not doubt. They also know high net worth drugs complete with the targeted market.

They also have original prescription scripts from all the major hospitals, fake stamps as well as messengers who come in handy to either pose as the sick and collect the drugs to be delivered at a shop in downtown Nairobi at a fee. Where hospitals have put sophisticated systems, a pharmacist is recruited to help in taking out the original drugs.


The owners of the cards rarely realise the fraud unless they fall sick and find their covers exhausted, a rare occurrence since the fraudsters chose lucrative covers.

While photo cards have been the most targeted as they are cheaper and easier to duplicate, the biometric cards are also being targeted with the excuse of “system downtime” regularly used when the card is being hit in collusion with hospital staff.

The Association of Kenya Insurers (Aki) says the use of photo cards have exposed their members to fraud and is turning out to be more expensive in the long run as fraudsters have a field day duplicating them.

Aki executive director Tom Gichuhi said the medical scheme fraud is rampant but hardly detected as it involves a closed group of individuals. Insurance companies have no escape rather than using the biometric cards which will minimise the volumes of fake claims threatening to bring the sector down, he adds.

“We have told our members that they rather pay more in the biometric cards than be left exposed with the photo cards because hospitals will rarely care to verify thoroughly whether the claim is fraudulent as long as it has funds. I have personally sent my driver with a photo card and he was given the drugs so easily.


“You cannot also transfer the responsibility of fraud prevention to the insured individuals in any way,” Mr Gichuhi said.

He said only a few insurance companies send statements to individuals to enable them track their card usage and sometimes the statements take too long to enable them detect any anomalies.

“How many people even bother to check their bank statements, let alone medical insurance cards. The sector simply needs a dose of technology,” he posed.

So lucrative was the trade that one messenger decided to begin writing his own prescriptions. He had studied previous slips from the doctors and knew which drugs were expensive and fast selling. He gave it a try, failed and leaked the network, drawing the attention of the insurance sleuths.

“He prescribed a weight loss drug and had failed to make any links with the hospital. The man who was to act as a patient was however quite thin and the pharmacist got concerned. On further probing, the ‘patient’ tried to escape, prompting arrest. We then used him to trace the network which pointed at literally the same doctors, pharmacists and hospitals,” the investigators said.


An investigation report seen by the Nation show that the cartel target embassy staff whose cards were found to be regularly collecting drugs in Kisumu and Mombasa, places they have never been based at.

Some staff at the Judiciary, the Independent Electoral and Boundaries Commission, a bank, a Western foreign mission in Nairobi and an international non-governmental organisation were among those targeted by the fraudsters.

The number of health insurance fraudulent claims had increased from 22 in 2008 to 225 in 2012 with slight decrease recorded in 2011. The value and total amount paid for health insurance fraudulent claims increased by an average of Sh47 million and Sh497 million per year from 2008 to 2012 respectively.

Lack of adequate data on medical card fraud has left the industry with little to act on as the insurers continue to bleed from it.
An Aki survey done in 2013 on health insurance fraud identified the same challenges with only the flaws involved pointing to the loopholes easily exploited by fraudsters targeting the medical insurance sector.