Determinants of effective fraud risk management practices among medical insurance providers in Kenya
Date
2022
Authors
Mwangi, A. W.
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Publisher
Strathmore University
Abstract
According to the Insurance Regulatory Authority, at least 40% of medical insurance claims in Kenya bear an element of fraud. The inability to effectively manage fraud risk has tainted the image of the medical insurance industry, becoming a major contributory factor alongside high premiums for low uptake of insurance in the country. The market penetration rate of insurance in Kenya as at end of 2016 was the 3 rd lowest in Sub-Saharan Africa at only 2.7%, also significantly lower than the world average of 6.8%. This demonstrates that FRM in the medical insurance industry in Kenya is a major concern hence the motivation behind this study to examine the determinants of effective fraud risk management in medical insurance providers in Kenya. The study focused on top management support, technology adoption, regulatory policies and employee empowerment. The research was grounded on the fraud management lifecycle theory and the institutional theory. The study adopted a positivism research paradigm and applied a descriptive correlational research design. The population for the research was drawn from all the 26 medical insurance providers in Kenya with a claims manager, risk & compliance manager and underwriting manager from each insurance provider taking part in the research. The research utilized structured questionnaires in the collection of data. The final sample comprised of 54 responses from the sample size of 78 management staff which represented a 69.2% response rate. 61% of the respondents were female and 53.7% were claims managers. The collected data was analysed using descriptive, factor, spearman’s rank coefficient correlation, and ordered logistic regression analyses. The factor analyses results revealed that effective fraud risk management practices in medical insurance providers in Kenya fall under two main components - preventive and detective FRM practices. In sum, the study established that top management support, technology adoption and employee empowerment have a positive and significant effect on effective FRM practices among MIPs in Kenya. The study further established that regulatory policies have a positive but insignificant effect on effective FRM practices among MIPs in Kenya. The study recommends that there be more consultation and engagement between the insurance regulator and MIPs to increase the likelihood of formulation of regulations and policies which will complement effective FRM. The study further recommends that management in medical insurance firms make a concerted effort to foster an environment of teamwork in problem solving, delegation of duties, as well as facilitate professional development training to enhance employee skills and competencies as these contribute positively towards effective FRM. Finally, the study recommends that MIPs in Kenya should endeavour to abandon manual processes and embrace systemisation and automation, where possible. The adoption of digitalized forensic systems, fraud detection frameworks, machine learning technologies and other emerging technologies play a significant role in detection efforts towards effective FRM in Kenyan MIPs. Further, mobile technologies, blockchain technologies as well as the creation of automated platforms for regular systems audits and risk identification are a fundamental part of effective preventive FRM.
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Citation
Mwangi, A. W. (2022). Determinants of effective fraud risk management practices among medical insurance providers in Kenya [Strathmore University]. http://hdl.handle.net/11071/13532