Invesco owners face fraud challenge

However, a realisation is sinking in that this captive pool would not be adequate to keep the firm afloat, meaning it would have to draw another 3,000 policies from outside its membership. The association’s clout in the sector has recently been undermined by a falling out with the Matatu Welfare Association, the other lobby in the public service vehicle sector, over a strike that was called two weeks ago to protest against police harassment.

MOA chairman Simon Kimutai said the company requires a minimum 8,000 policies to become viable, a substantial fraction of whom must have shareholder loyalty to help the company curb fraud.

The company already faces claims totalling Sh600 million, provisionally half of them fraudulent according to Invesco CEO Geoffrey Njenga. He said the company is also owed Sh300 million by brokers and agents.

“We are counting on self regulation because asset (matatu) owners are members of the assets and will therefore have a profit motive,” said Mr Njenga.

Pinnacle Projects Limited, which was hired by the MOA to do a feasibility study on Invesco forecast that the new Invesco could record Sh450 million net earned premiums and Sh155 million pretax profit in 2010, which would grow to Sh950 million net earned premiums and Sh330 million pretax profit in 2012.

The shareholding of MOA’s holding company in Invesco will be limited to 50 members, either individual or Saccos depending on the shareholding application profile that is ongoing. Sacco membership could be ideal as Saccos pool many vehicle owners together. There are about 50,000 matatus operating in Kenya according to new figures released by the MOA.

The company intends to reduce the length of time it takes for an accident or theft to be reported to the insurer because the longer the length of time, the higher the opportunity to create fraud.

“We shall require our policy holders to instruct their drivers to report any incidents within the first 12 hours so that we act on them immediately,” said Mr Njenga. This requirement may however hit a snag if owners of such matatus are not shareholders of the insurer either directly or through their Sacco, meaning they will have less motivation to adhere to such requirements.

MOA purchased 80 per cent of Invesco through its holding company, the Public Transport Investment Company. The company will issue initial 6,000 shares, each costing 20,000, meaning a total initial capital of Sh120 million.

Former owners of Invesco have retained 20 per cent stake and pumped in Sh30 million to cap the Sh150 million required by the Insurance Regulatory Authority (IRA).

But the shareholders will be expected to double this capital in five months because their licence as a composite insurance company requires it to have a minimum capital of Sh300 million by June under enhanced capitalisation measures announced by the government two years ago.

The company said it has joined hand with the industry to create the motor vehicle online registry that is able to track in real time which vehicle has been insured or whose claims have been paid to prevent fraud.

Fraudsters have for long utilised lack of information sharing in the industry to insure a vehicle many times among other resulting frauds.