FRAUDULENT ACTIVITIES AND SURGE IN PUBLIC SERVICE VEHICLE CLAIMS IN INSURANCE INDUSTRY IN KENYA

ABSTRACT In Kenya, all Public Service Vehicles are obligated to have third party liability cover hence motor insurance is key to the sector. The purpose of this study was to establish determinants of rise in PSV claims with reference to the leading PSV underwriters namely; Directline insurance company, Invesco insurance company, and Xplico insurance company. Specific objective was to establish the effect of fraudulent activities on PSV claims in Insurance Industry in Kenya. The study adopted a descriptive design with a sample size of 115 respondents from a target population of 382 employees. Data was collected via a questionnaire administered through electronic media. All ethical aspects were observed. Data was analyzed by SPSS version 21 software and the results presented in frequencies and other measurements. It was found that fraudulent activities significantly influenced PSV claims. The study also found that the number of claims in the sector kept rising. The study also revealed that many insured regard insurance as a victimless crime and some engage in fraudulent activities based on widespread perception that corruption is an acceptable norm. Some employees of insurance firms often aid outsiders in lodging false claims. False claims also arise situationally where alleged accident victims often report pre-accident losses and defects as if sustained during the accident. To rid the sector of this malpractice, the study recommended urgent measures be instituted by the regulator and stakeholders in the insurance industry to proactively eradicate fraudulent activities. Partnership between PSV operators, underwriters and stakeholders in the transport sector would greatly complement traffic rules. Key words: Fraudulent activities, misrepresentation, surge in PSVclaims