Insurance frauds will pay 10 times the amount swindled if MPs pass a new law.
The Insurance (Amendment) Bill, 2018 further proposes insurance fraudsters be jailed for a period not exceeding five years.
The bill by National Assembly’s Finance committee chairman Joseph Limo on behalf of the National Treasury states one is guilty of an insurance fraud after engaging in it “knowingly, by an act or omission” to injure, defraud or deceive.
The bill which seeks to amend the Insurance Act, forms part of legislative reforms presented by Treasury CS Henry Rotich in his budget speech on June 14.
“The bill seeks to amend the Act by introducing a legal provision creating offences on insurance fraud, including penalties intended to address the problem of insurance fraud that continues to be a major challenge to the stability of the insurance industry in the country,” part of the bill reads.
It adds that the amendments will see the Act comply with International Association of Insurance Supervisors standards on countering insurance fraud.
Rotich told the House lack of adequate laws to govern the insurance sector have seen increased cases of fraud.
Audit firm KPMG three years ago said insurance premiums in Kenya could be 20 per cent lower if fraud was curbed.
The bill states that fraud is committed when a perpetrator, including an insurance official, prepares, assists, abets, solicits or conspires with another to make any false oral or written statement to defraud an insurer through compensation.
Lost money, property and assets would also be recovered from the culprit through a civil suit.
An insurance beneficiary would be required to swear an affidavit regarding the lost or destroyed original special insurance policy exceeding Sh100,000 before being issued with another policy.
The existing Act does not require a policyholder to swear an affidavit for compensation from the loss.
The bill prohibits an insurance company from assuming a risk in Kenya unless and until the premium payable is received and the insurer will be required to pay an intermediary firm the insurance commission within 30 days after receiving the premium.
“An insurer who contravenes shall be liable to a penalty of Sh5 million on each contravention, payable to the Policyholders Compensation Fund,” reads the Bill.
The proposed law bars an insurer’s intermediary from receiving any premiums on behalf of the company.