Letters

LETTERS: Budget a disappointment for insurance sector

budget read

National Treasury Cabinet Secretary Henry Rotich poses for a photo outside The National Treasury Building ahead of the 2018/19 budget presentation at Parliament on June 14, 2018. PHOTO | DIANA NGILA | NMG

The 2018 National Budget was a real disappointment for the insurance intermediaries in this country. We expected a number of positive developments in the sector like how to improve on training for insurance agents in a bid to equip them with the necessary skills to sell insurance.

We expected developments like how to get rid of rogue insurance agents in the sector who continue maligning the name of the insurance industry. We expected proposals on how insurance intermediaries can be brought together through a strong association with teeth and which is properly funded so as to properly articulate agents’ issues in this country in a bid to improve on insurance penetration.

But the proposals in this budget left us waiting and wanting more, and it is like the budget was not read for us. If the insurance sector proposals go through, the changes will alter the playing field significantly.

The CS has proposed to amend the Insurance Act to require payments of insurance premiums directly to insurance companies. Whilst this move casts doubt about the continued relevance of insurance intermediaries such as agents and brokers, the Kenya Revenue Authority (KRA) will no longer collect withholding tax on agency and brokerage commissions and these commissions run upward of three billion.

The issue of insurance penetration was not mentioned and this veers away from earlier budgets that have put insurance penetration to the forefront and proposals addressed to achieve the same. This now leaves us really wondering as to who actually is advising the treasury on insurance matters.

We need to realize that a strong economy has a very robust insurance sector that is able to cushion individuals and the economy for that matter from shocks in case of a calamity.

But how do you have a robust insurance sector and therefore a strong growing economy if the sector is largely ignored?

There were proposals to improve on agriculture insurance through subsidies of premiums in the sector where the government has pledged to provide Sh300 million towards that end.

READ: Direct insurance purchase push to edge out agents

But who will advise these farmers on these developments if not the insurance intermediaries who the government seems to want to kick out of the industry?

One of the goals of Kenya Vision 2030 is to increase employment in the country. Insurance intermediaries in Kenya number over ten thousand.

These are the people who the government want to kick out by the proposals so outlined.

The government also seems to shoot itself in the foot as they have spent millions in training of young people and espousing the attractiveness of insurance in a bid to have more of the public to come in the insurance industry and sell insurance. This has largely been through the Executive Certificate of Proficiency programme (ECOP).

These proposals by the government are sending a wrong signal to the public, because the millions spent should have been better spent elsewhere than spending it on a program that they will later frustrate. Do the proposals mean that all the insurance intermediaries in the industry would better start looking for another job?

Does the government expect members of the public who want insurance to start lining up in the halls of insurance companies to pay insurance? And where will these potential insurance customers come from if not through insurance agents? The proposals in the budget would have been handled in a better way if the goal was to protect the insureds.

There are laws even now that protect the insureds premiums from misuse by intermediaries and these would have been strengthened, than telling the insured to pay directly to insurance companies. The inconvenience in that is telling and this will frustrate further the public from consuming insurance products.

There are already those who pay directly to insurance companies even now because of various factors, but now criminalizing touching of premiums by intermediaries is frustrating our work and the government is a little bit misadvised on that one.

We expected the government to pursue the Financial Services Authority Act (FSA) that was meant to bring in all the other financial players together and which would have recognized the various associations in the various sectors.

The proposals in the FSA are good and should be pursued, but running away from that and introducing the above almost looks like the government is using kneejerk reactions to happenings in the country and that it is not in control.

Let the CS Treasury come up with something better for the intermediaries and prove that they actually want to increase insurance penetration in this country. In the meantime, we urge parliament to shoot down this proposal and task the Treasury to go back to the drawing board on this one.

Washington Ndegea, chairman, Bima Intermediaries Association of Kenya.