Why Kenya’s insurance sector is “rotten”


Kenya’s insurance sector has been rocked with controversies among them failure to meet contract obligations, exposing policy holders to risks rather than being cushioned as expected of indemnity.

In the latest twist of events, it has emerged that over ten insurance companies in Kenya are not paying claims, despite collecting billions in monthly premiums from their clients.

This has left hundreds of thousands exposed to risk while affected persons suffer despite having insurance covers.

There are 37 general insurance companies and 25 long term insurance companies, placing the total number of underwriters at 62.

The country’s insurance market has also been infiltrated by banks, which are offering insurance services under the ‘Bancassurance’ umbrella.

READ:What’s next for the insurance industry in Kenya?

Billions in premiums

According to official data by the industry regulator-Insurance Regulatory Authority (IRA), insurance industry gross premium written stood at Ksh216.37 billion (US$2.12billion) as at end of 2018, representing an increase of 4.2 per cent from Ksh207.68 billion (US$2.03 billion) in quarter four of 2017.

“Segment growth was higher in life insurance business at 5.3 per cent compared to a growth of 3.5 per cent experienced in the general insurance business,” IRA notes in its latest report.

In Q4 2018, general insurance premiums recorded a growth of 3.5 per cent to Ksh129.03 billion (US$1.26 billion) compared to Ksh124.7 billion (US$1.2 billion) in the same period the previous year.

Despite the growth, some of the companies have been turning away clients seeking compensation.

READ ALSO:Kenya Insurance woes, as agents claim cartels behind IRA

“ At this point it would be good to point out that over ten insurance companies in Kenya are not paying claims, whether by default or otherwise,” said Washington Ndegea, the Chairman-Bima Intermediaries Association of Kenya (BIAK).

“There’s no single company that has complained of delayed premiums or in effect named any of those that could be delaying their premiums. They are simply not paying claims because they have mismanaged their finances,” Ndegea added.

BIAK is an umbrella body for insurance agents in Kenya which has been ensuring sanity in the industry with its members adhering to the Insurance Act, which is strict on the non-payment of premiums by intermediaries.There licenses are at stake should one fail to pay.

Insurance fraud

The country has continued to be rocked with numerous insurance fraud cases mainly on fraudulent claims.

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IRA data shows during quarter four of 2018, twenty six (26) fraud cases were reported to the Insurance Fraud Unit (IFU).

“Out of which twenty one cases are under investigation, four cases are pending in court while one case has been withdrawn,” IRA notes.

The number is however feared to be high, mainly the unreported cases in general and medical insurance according to industry players.

Some hospitals have also been linked with overcharging clients covered by insurance firms, where they have turned medical insurance covers into cash cows.

For instance, hospitals have formed a trend of doubling or even tripling the cost of medication for clients who seek their services with insurance covers, compared to those paying in cash.

Some admitted patients are held for more days in hospitals despite having recovered and ready for discharge, a strategy used by health facilities to make money from insurance companies.

There have been calls to name and shame notorious hospitals but so far, none has been made public, though a huge number of the country’s population is aware of the culprit facilities.


Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank’s client base.

In Kenya, Bancassurance remains a relatively new concept that is still at the teething stage  despite the Central Bank of Kenya(CBK) licensing the first commercial bank in 2004 permitting it to trade bancassurance products and services.

About 26 banks have had their bancassurance agencies licensed and are currently offering bancassurance products and services.

READ:Sanlam Kenya strengthens insurance distribution through Bancassurance partnership with Standard Charted Bank

Since the entry of banks into the insurance field, a lot of bad blood has been created, mainly caused by the banks encroaching on and forcing clients to take up insurance with them.

Banks are said not to remit insurance premiums to insurance companies unless when forced to do so.

“Any insurance company doing business with a bank can attest to this. They simply do not follow the insurance rules as stipulated. Why they are never penalized or chastised is any one’s guess,” Ndegea said.

It is feared that banks will continue breaching the insurance laws in the country as majority are politically connected, mainly where owners or big shareholders are politically connected and who ride rough shod over everyone.

“Our cries to IRA have gone unheeded even when we point out that they are doing insurance business in unorthodox manner. But then banks cannot let go of insurance broking at all because it has given them free money to trade with in form of premiums,” an industry player noted.

BIAK had in the 2019/2020 budget proposal called for the removal of banks  from doing insurance inform of bancassurance, urging the National Treasury and legistlators to look into the matter afresh.

“We feel their entry into the sector has just brought confusion and chaos,” the association’s leadership had told Treasury CS Henry Rotich in a proposal.

Policy changes

Other policy changes proposed by industry players include having intermediaries’ withholding tax to five per cent (5%) from the current 10 per cent.

BIAK has also proposed that as an agents association, it be incorporated into the insurance Act, a move it says will strengthen it and in turn strengthen the sector by acting as a watchdog for the regulator.

This will also bring about self-regulation which the agents fraternity badly needs because of the many rogue agents in the sector, the association notes.

Treasury has also been petitioned to have insurance agents representative be included in the Policy Holders Compensation Fund, for a representation of their clients.

Agents also want to be consulted especially when commissions are being fixed, to remove the uncertainty regarding their incomes.

An example is where they (intermediaries) are now earning a 10% commission on medical from the original 20%. No one knows how the new commissions came to be, according to a section of the industry players.

Data from IRA indicates there are over 10,000 licensed insurance intermediaries in the country.

In Kenya, insurance customers can access insurance products either through the insurance company directly, which accounts for 18 per cent of the market, through agents (50.5%) or through brokers who control the remaining 31.5 per cent of the market.

The remaining market share goes to banks offering insurance services in partnership with insurance firms.

The key players regulated by IRA are insurance companies, reinsurance companies, insurance brokers, insurance agents, motor assessors, insurance investigators, insurance surveyors, loss adjustors, claim settling agents and risk managers.

Will sanity be instituted in the country’s’ insurance sector? It is a wait-and-see matter as customers remain the most vulnerable and likely to continue missing out on the much needed actual compensation.

READ ALSO:The storm inside Kenya’s insurance sector

Martin Mwita is a business reporter based in Kenya. He covers equities, capital markets, trade and the East African Cooperation markets.

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