The recently released insurance Q1 2020 statistics from Insurance Regulatory Authority (IRA) show a disturbing trend confirming what everyone now knows is a downward spiral of insurance growth in Kenya.
There are several factors that precipitated this including a lack of commitment by the regulator to deliberately steer the industry towards growth by encouraging and working with industry associations to stimulate growth. The impasse created intentionally by the regulator and its hardline stance not to recognise associations and have them anchored in law will continue to create a losing battle on insurance growth even as the Authority spends taxpayers’ money on futile exercises. Fraud continues to be abetted and every conman has found easy prey in insurance clients who are conned day and night by supposed “insurance agents”. This is an issue that can be addressed by associations regulating discipline among their members and administering professionalism. But the regulator needs someone to blame so it will not empower associations to bring sanity into the sector.
There is also unhealthy competition that has been encouraged between various industry associations by the regulator whereby no effort is made to encourage them to work together for the betterment of the industry, and most importantly, with the policy-holders. Maybe the question would be: where are these games being played by the regulator?
We all know that unity is strength and that when people come together they can build a Tower of Babel towering into the clouds. That would not be for anyone’s good especially for those who feel threatened by that kind of unity. We know that a strong agents and brokers body can move policy and literally hold the industry at ransom. But that has not been proven and the fear is only of shadows and the guilty being afraid. When associations are not included in policy decision-making on behalf of the industry then all other attempts will fall flat on the face and the industry’s growth will be stunted.
The post Covid-19 era will not be good for the economy and especially the insurance sector. The economy has taken a beating and premiums are not being paid leading to lapsing of policies. Cars are not being imported therefore motor insurance premiums are being lost. Premiums from travel insurance are not being realized because airlines have been grounded…the situation can only get worse.
Moreover, coupled with that are the moribund laws being enacted in the insurance sector deliberately crippling insurance intermediaries. The recent passing of the Tax Laws (Amendment) Act 2020 ostensibly to take care of the small man was anything but. Value Added Tax (VAT) was introduced to insurance intermediaries leading to them being the most taxed group in Kenya seeing that they are paying withholding tax and income tax at the same time. No one bothers to find out the stakeholders’ views on these laws and the regulator needs to be held accountable for these developments because they are advisors of government on matters insurance. The result will be complete death of the insurance industry unless some of these laws are rescinded. Intermediaries are already looking for better things to do because the effort of their labour is neither being recognised nor bringing in any returns. Yet that seems to be the intention of the government because it appears the only group left to do insurance in Kenya will be the banks.
We should remember that a law was passed last year, despite evidence to the contrary, that insurance cannot be done by intermediaries without them touching their clients’ monies in facilitation of paying their premiums. Thank God the courts saw our view because as of now half of the agents practicing insurance would be at home. But introduction of more laws to suppress intermediaries in this country has us worried because we now believe it is a well-orchestrated move to get rid of the over ten thousand two hundred intermediaries in this country despite the government paying lip service to employment creation.
Banks as mentioned earlier will be the beneficiaries of all the billions in premiums generated over the years by insurance intermediaries once we all go home because they have evolved into a different entity in insurance, where they are not classified as agents or brokers. We also all know the owners of banks in this country being the politically connected individuals who only think about their bottom lines. By not thinking about the future of insurance in this country, we are killing our economy because an economy without a strong and robust insurance sector will just be mark-timing and no meaningful growth will ever be experienced.
A question arises, why are we shooting ourselves in the foot?
Washington Ndegea is Chairman, Bima Intermediaries Association of Kenya (BIAK)