Introduction
Life insurance is a crucial financial tool designed to provide security and peace of mind for your loved ones in the event of your passing. However, the world of insurance is not immune to scams and fraudulent activities. Being aware of the most common life insurance scams in Kenya and learning how to avoid them can help protect your hard-earned money and ensure that your beneficiaries receive the financial support they need. This comprehensive guide will discuss the top life insurance scams in Kenya and provide actionable tips on how to avoid them.
- Stranger-Owned Life Insurance (STOLI)
In a STOLI scam, an investor or group of investors takes out a life insurance policy on someone with no insurable interest in that person. The policyholder receives a cash payment for allowing the investors to take out the policy. The investors then hope to profit from the death benefit when the policyholder passes away. To avoid this scam, only take out life insurance with a reputable insurance company and never allow someone with no insurable interest to own a policy on you.
- Fake Life Insurance Policies
Fraudsters may pose as insurance agents and sell fake life insurance policies. They may even create fake insurance companies to scam unsuspecting customers. To avoid this scam, always verify the legitimacy of the insurance company and the agent before purchasing a policy. You can do this by checking the company’s registration with the Insurance Regulatory Authority (IRA) in Kenya.
- Premium Diversion
In this scam, the insurance agent or broker collects insurance premiums but fails to remit them to the insurance company. The policyholder may think they are covered, only to find out they have no insurance when they need to make a claim. To avoid this scam, always work with licensed insurance agents and make payments directly to the insurance company, not the agent.
- Fraudulent Claims
Some individuals may attempt to fake their own death or the death of a beneficiary to collect the life insurance payout. This type of fraud is not only illegal but can also lead to criminal charges. To avoid becoming an unwitting accomplice to this scam, report any suspicious activity related to life insurance claims to the insurance company and relevant authorities.
- Overcharging and Misrepresentation
In this scam, an insurance agent may misrepresent the terms of a policy or overcharge for a policy to increase their commission. To avoid this scam, carefully review the policy details and compare it to other options in the market before signing any agreement. If an offer seems too good to be true or the agent is pressuring you to make a quick decision, take a step back and do more research.
Conclusion
Navigating the life insurance landscape in Kenya can be challenging, but being aware of the most common scams can help you protect yourself and your loved ones. Always work with licensed insurance agents, verify the legitimacy of the insurance company, and carefully review policy details before making any commitments. If you suspect a scam, report it to the relevant authorities and take steps to protect yourself and your financial interests. By staying informed and vigilant, you can ensure that your life insurance policy provides the security and peace of mind you need.