This article has been prompted by a headline that appeared in one of the dailies a while back about intermediaries’ billions owed to the Kenyan insurance sector by insurance agencies, brokers and others.
While this matter is grave and cannot be taken lightly, noting that it is people’s financial ruin we are talking about, the erroneous message cannot go unchallenged and a right assuaged where need be. The article did not correctly say who owes the money. For perspective, we have three types of insurance intermediaries in this country: brokers, insurance agents and now the banks.
The over ten thousand licensed insurance agents in Kenya mainly practice insurance under a cash-and-carry basis meaning they do not get insurance coverage till they pay cash for them.
Insurance brokers in Kenya, as well as insurance agencies, can negotiate terms requiring insurance coverage under credit terms, as happens in the banking industry. The article seems to go all out to malign the insurance agents’ names by saying they are the ones owing the billions.
This gives the impression there could be a hidden motive in the penning of the article. The Kenyan insurance sector is highly regulated, and a working regulator should ensure that such cases are unheard of with licensed insurance agents in Kenya.
According to the Insurance Act Cap 487 Section 156 talks about insurance premiums and the manner in which they are supposed to be remitted to the insurer. Insurance brokers in Kenya are supposed to remit their premiums immediately after they receive the same from the client. Other intermediaries have a certain window within which they are supposed to remit the premiums and this goes for all the licensed insurance agents in Kenya.
In case of non-remittance of premiums, the same Section 156 deals with that. It is important to note that there is a regulator in the Kenyan insurance sector, namely the Insurance Regulatory Authority – IRA, which is mandated with the responsibility to regulate the industry using the laid down rules of insurance as spelt out in the Insurance Act and among these is the duty to deregister anyone having been found to flout the rules.
The biggest question is how billions of premiums came to be owed in the sector even when all these rules abound. The most telling explanation is that the regulator is sleeping on the job such that it is not enforcing the rules. Billions of premiums are not owed overnight and they must have been accumulated over a period of time.
Why, then, do we have players in the Kenyan insurance sector owing premiums year-in-year-out and still be licensed to carry on the insurance business? Since we know this is Kenya, is it true that, like it has been whispered elsewhere, bribes are the order of the day at IRA so that licenses can be issued?
What other explanation can be given for the billions accumulated over time by these insurance agencies and other players?
Another intriguing factor in all this is that the regulator is the one making a report about the premiums owed by Insurance brokers in Kenya like it is a complete stranger to the action, as if the Authority does not belong to the industry and as if the responsibility does not fall squarely on the shoulders of those charged with the responsibility to take swift and appropriate action against those who break the rules of the Kenyan insurance sector.
Why, then, do we have a regulatory body that cannot perform its job?
Should not the IRA be scrapped and a better and more effective body mooted for? I personally have called for the scrapping of the IRA, but as usual, it has not been acted upon.
An important factor to consider is that the billions owed have shown a sharp increase, especially from 2014 onwards. This was when banks became insurance brokers in Kenya in a big way and discovered that serious money could be made. It is common knowledge, too, that banks rarely remit premiums collected but instead use the same to trade with. The fact that banks, through their insurance agencies, cannot expressly be pointed out in the report just proves to us that the regulatory authority is out to play games and not to act for the betterment of the industry. Banks have become the blue-eyed boys of the IRA, whose acts are always taken as being above board.
It is high time the Kenyan insurance sector woke up to the fact that the current regulatory authority will not bring about change in the industry but for the Treasury stamping its foot and demanding better of the regulator.
Washington Ndegea is the Chairman of Bima Intermediaries Association of Kenya (BIAK)