While all the current talk in the insurance industry is everything about insurance penetration and how it is not happening in Kenya, an illegality continues to be perpetrated raising a very disturbing and pertinent question: could we be holding onto fake insurance certificates?
Legally as will be demonstrated below, certificates are supposed to be issued by insurance companies in Kenya and no other entity. Where they are issued by any other entity, then questions arise as to the legality of the whole exercise.
In The Official Gazette of The Colony and Protectorate of Kenya of November 14,1944 a Bill was proposed to make provision against Third Party Risks arising out of the use of Motor Vehicles.
Section 5, subsection (a) of the proposal states that the policy of insurance must be a policy which,
“is issued by a person who is approved by the Governor, by notice in the Gazette, as an insurer for the purposes of this Ordinance”.
Section 7 of the same proposal describes a Certificate of Insurance, and states:
“A policy shall be of no effect for the purposes of this Ordinance unless and until there is issued by the insurer to the person by whom the policy is effected a certificate (in this Ordinance referred to as a “certificate of insurance”) in the prescribed form and containing such particulars of any conditions subject to which the policy is issued and of any other matters as may be prescribed, and different forms and particulars may be prescribed in relation to different cases or circumstances”.
In the Insurance Motor Vehicles Third Party Risks Act No.12 of 1945 Section 7 repeats the description of what a Certificate of Insurance is. Under the law a policy of insurance must be a policy which,
“is issued by a company which is required under the Insurance Act 1984 ( Cap. 487) to carry on motor vehicle insurance business”.
In the event that a certificate will be issued, who then designs and prints the same, or is it specific insurance companies?
Association of Kenya Insurers (AKI) cannot assume the role of issuing motor vehicle certificates because these are legal documents being issued by an entity not recognised in the Insurance Act. All motor insurance certificates bear the logo of AKI bringing into fore a serious legal issue as to the legality of the same, or can it be assumed that the same has no legal bearing?
For the certificates to be legal and binding, AKI must be incorporated into the Insurance Act as a self-regulatory body of insurance companies and empowered by the Insurance Act to design, print and issue certificates.
As the situation stands AKI does all the activities previously mentioned which is an illegality because it is assuming roles it has not been granted in the Act. What happens if a company is not a member of AKI? Would it still issue motor vehicle certificates in its name without the involvement of AKI? That would not be possible because AKI controls who gets the motor vehicle certificates which goes against the Insurance Act because AKI is basically not supposed to withhold the same from insurance companies. The certificates are essentiallysupposed to be issued by the Minister concerned as evidenced in the Act.
AKINSURE Insurance Handbook, an AKI publication, doesnot mention anything about whether itis supposed to make or handle insurance certificates, which is a glaring omission. The AKI website also doesnot mention anything about the mandate to print motor vehicle insurance certificates.
Another serious issue to consider is that the certificates are issued to all insurance companies in Kenya regardless of their conduct in the industry, mainly lack of adhering to laid down rules of insurance like payment of claims. Many insurance companies in Kenya not honoring motor vehicle claims payments still get motor certificates from AKI reducing the organisation to peddling the same since it cannot control or regulateitsmembers and force them to pay claims. This is because it does not have teeth to do so and that is a power AKIshould be granted in the Act if itis to continue handling the certificates.
We should remember that AKI’s membership is voluntary and a company should be able to issue motor vehicle certificates without interference by AKI unless the law is changed to recognise all the self-regulatory organisations in the insurance industry. That is why the AKI logo on all motor insurance certificates in Kenya should be removed.
A question comes to mind.AKI came into being in 1987: who was making and regulating motor vehicle certificates before that?
Washington Ndegea is Chairman, Bima Intermediaries Association of Kenya (BIAK)