Some industry players have been accused of unethical practices, including premium discounting, premium non-remittance and undercutting.
Premium undercutting results in revenue loss weakening the insurers’ ability to promptly settle claims, ultimately eroding business confidence and entrenching negative perception of the underwriting industry among customers.
Insurance brokers have offered to lead the process of developing rules to curb rampant price undercutting in the industry.
The Association of Insurance Brokers of Kenya (AIBK) on Monday said insurance services are the only ones whose prices keep dropping every year, particularly when such facilities are procured through open tender.
“The law of supply and demand should lead to efficiency and correctly priced goods and services. It should not hurt players, including intermediaries and underwriters. Instead it should encourage coexistence,” said AIBK chairman Nelson Omolo.
“To this end, our association hopes to work with Association of Kenya Insurers (AKI) and Insurance Regulatory Authority (IRA) in developing guidelines to safeguard the current rampant price undercutting.”
The lobby termed this as one of the key processes that will harness the future of insurance.
Some industry players have been accused of unethical practices, including premium discounting, premium non-remittance and undercutting.
Premium undercutting results in revenue loss weakening the insurers’ ability to promptly settle claims, ultimately eroding business confidence and entrenching negative perception of the underwriting industry among customers.
IRA data shows that in 2016 premium undercutting resulted in general business reporting an underwriting loss of Sh2.13 billion. The medical class reported escalating losses amounting to Sh621.64 million, an increase of 427 per cent from 2015.
Other loss making classes were motor private (Sh3.29 billion), personal accident (Sh341.21 million), workmen’s compensation (Sh100.67 million), engineering (Sh58.09 million) and aviation (Sh90.55 million).
This implies that the insurers paid out more in claims and expenses than premiums collected.
