Insurance fraud investigators have busted a cartel of con artists who are using fake car log books to swindle insurers out of millions of shillings. The cartel, suspected to consist of about 10 scammers, has alarmingly managed to infiltrate the National Transport and Safety Authority (NTSA) online database, compromising the integrity of vehicle registration details.
Insurance industry officials and NTSA director general Francis Meja confirmed the existence of the cartel, but were unwilling to release details of the ongoing investigations to avoid forewarning the fraudsters. “We inherited a weak system from KRA (Kenya Revenue Authority) but that is changing after we migrated services online with a robust system,” said Mr Meja in an interview.
The NTSA, which took over the role of registering vehicles from KRA in 2012, has migrated the logbooks database to an online platform that is now the exclusive channel through which car owners originate and execute transfers.
In one of many cases that are currently under investigation, the swindlers acquired a write-off Nissan March car that previously belonged to a woman who had already been paid Sh500,000 by her insurer after being involved in an accident.
They then used the car’s plate and chassis number registration details (withheld for legal reasons) to generate a fake logbook for a non-existent Toyota Land Cruiser V8.
The swindlers, in collusion with a top insurance brokerage and vehicle inspection firm proceeded to insure the Land Cruiser V8 for Sh5.5 million.
The swindlers, who have registered at least eight phony companies to execute their schemes, presented a theft claim to a Nairobi Securities Exchange (NSE) listed insurance company, which alerted the Insurance Fraud Investigation Unit after detecting the anomalies.
“The car’s registration number metamorphosed into a V8,” said an insurance industry source who requested anonymity to avoid compromising the ongoing investigations.
The Business Daily shared the registration details of the said Land Cruiser V8 with Mr Meja, who however said a search indicated that it was registered as a lorry in the NTSA database.
“It could be fake or a cover up. We are looking into it,” said Mr Meja.
Investigations by the insurance fraud agency have narrowed down to the gang of 10, which also includes a con woman. They are believed to be working with insiders in NTSA, insurance firms, insurance brokerages and motor vehicle assessors.
“Most of them are related to each other and have been on the radar of anti-fraud police for a while due to their numerous motor vehicle insurance claims,” said the insurance industry source.
Commercial banks are also not spared by the prowling fraudsters who forge car documents to borrow loans.
The forgery has also exposed unsuspecting genuine car owners, whose details have been duplicated by the cartel, to run-ins with the police. Mr Meja said one of the safeguards put in the online vehicle registration database is that once ownership of a vehicle changes hands the owner immediately receives an alert on their phones.
As much as online car registration has increased efficiency, reduced bribery and made vehicle transactions flexible, fraud cases are emerging as its downside.
The probe by the Insurance Fraud Investigation Unit says that the lady owner of the Nissan March that was written off was not aware that the cartel had acquired the salvage and generated a fake log book.
“Armed with this new logbook, complete with a valuation report from (name withheld), the fraudsters took a new policy for this phantom car. “Upon scrutiny we realised that this car registration details had earlier been used for another claim,” said an investigator working on the case.
Enquiries at the KRA showed that there were no tax details for such an imported V8 vehicle bearing those registration details. To further cover up their tracks and make their cases appear genuine, most of their claims purport that the vehicles are bank-financed.
They present the logbooks in such a way that indicates that the cars are bank financed and thus apply pressure for the insurers to settle the claims promptly.
“To finally execute their plan, they report the car has been stolen and file for a claim. They go for this strategy rather than accident because they have no exhibit to present for assessment,” the probe said. “They go for theft because it requires one to only produce a logbook as proof of ownership.”
Mr Meja said the NTSA, KRA, police and insurance firms, through Association of Kenya Insurance (AKI), are moving to create an integrated vehicle database with data on insured car owners, their respective auto policy providers and their vehicle details aimed at sealing loopholes for fraud.
Regarding errant officers who might be colluding with fraudsters, Mr Meja said that those found culpable will face the full force of the law.
“In other cases, one vehicle registration number may have more than one owner filing for claims. Here, they invoke the agreed value clause so that in the event of a claim, insurers have to stick to the amount insured and not the pre-accident value,” the probe says.
“They also use top their insurance brokers who normally have muscle to exert pressure on insurance companies to settle claims.”