What is to “claw back” in insurance parlance 


According to Wiktionary, to claw back is to recover or retake with great effort something that was lost.  

In the insurance industry the words “claw back” are used in relation to insurance commissions that are deemed payable to insurance agents or brokers. The implication of these two words is that commissions paid up to the intermediary are forcibly taken away from them at a future time from other commissions payable for business delivered. The biggest question from this practice is: how legal is this? 

The Eleventh Schedule of the Insurance Act Cap 487 of the Laws of Kenya spells out maximum brokerage, commission or other procuration fees payable after a business is introduced into the insurance company by an intermediary. It is worthy to note that a commission is payable after the company is satisfied that the business so brought has met all the underwriting guidelines and has therefore been put into the books of the company. Everyone is happy. 

Also Read:Why do we award insurance companies?  

But the practice of claw back has removed all the joy of doing insurance business from agents in this country. This practice, predominantly in life insurance business, is carried out by a few companies that feel they should not have paid the commissions in the first place even after the business has undergone all the underwriting guidelines. The lead company in this practice has devised a cleverly-worded contract that surpasses the Insurance Act to get back previously paid commissions from the agent. As a result thousands of insurance agents have been impoverished and quit the insurance industry in a daze after realizing they cannot fight these companies either at the regulatory level or in court.  

Another question arises: why “steal” from insurance agents? The practice of recruitment of insurance agents from time immemorial has been to get those who are not employed or perhaps those who are desperate for a job to come sell insurance for these companies. The agents so enlisted are taken through a basic training and released into the field with their rudimentary financial knowledge. The effect of all this is miss-selling of insurance and a lot of fraud from these inadequately trained sales people.  

Post Covid 19 era in the insurance industry

But then why don’t these companies get properly trained people to do their sales? Your guess is as good as mine. Sales agents recruited through this process may not know enough about their rights as agents, few have ever read the Insurance Act to know where they stand in the scheme of things. They are treated as employees of the company even when they are, in reality, independent contractors. They are given targets like employees but do not have employee benefits. Few are knowledgeable enough to question why they are given targets and those who do risk being threatened and chased away. These recruits are easy to manipulate, oppress, and generally treated with disparagement because they have been conditioned to accept claw back even when it keeps them running on the spot in the journey of life. A more knowledgeable person and who is better able to analyse situations can see through the lies and either demand for better terms or quit altogether.  

What is incomprehensible is: why is this sort of behaviour allowed under the watch of the insurance regulating body?  

It is no wonder that the country’s insurance growth is never realised as the process of recruitment of agents should have been addressed years ago. It is Machiavellian for the regulating body to condone this practice that has wreaked the insurance industry and rendered it unattractive as an occupation. It is not a career most wish for their children regardless of how promising it can be when things are done properly. The regulating body has accountability and must address this issue as billions in taxpayers’ money is spent every year. 

The life insurance companies in this practice have reaped billions in the process and forcing them to abandon the practice has become a life threatening situation. It is no wonder now that agents in this country have started agitating for the practice to stop and fair treatment given to the insurance agent and their commissions refunded. It’s a wait and see situation to see who’ll blink first. 

Washington Ndegea 


Bima Intermediaries Association of Kenya (BIAK) 

Also Read:What ails Kenya’s marine insurance industry?   

Comments are closed.