The Insurance Regulatory Authority(IRA) recently released the unaudited results for the fourth quarter of 2018 showing an upward trend in insurance uptake with premiums rising 4.2 percent to Sh216.37 billion.
Specifically, long-term insurance business grew by 5.3 percent to Sh87.34 billion while commission payments for life business went down 1.2 percent to Sh65.673 million. That is a huge figure and questions should be asked as to where these commissions belonging to agents go to.
Insurance agents number more than 10,000 in Kenya and a half of that is unlicensed. About 5,000 of the licensed agents do life insurance.
Many agents leave the insurance industry every year due to loss of commissions through unfair means like clawback, a system where the company gets back all the commissions the agent earned.
That means that the growth of life insurance would be up many times over the announced figures if proper practices were put in place. The minimal growth of life insurance is a good trend for the industry and Life should be encouraged because it is one of the main sources of harnessing funds for development.
The minimal penetration of insurance has been achieved through the effort of the agents and the reason the industry does not see it fit to encourage more to join the industry is any one’s guess.
Retrogressive proposals in the Insurance Act like happened last year proposing that intermediaries not handle premiums should be done away with and friendlier measures introduced.
The regulator whose mandate is to supervise and promote the development of the industry is not practising the same with the agents and insurance growth will never happen because what should be done is not being done.
The report also talks of training by the regulator through the Executive Certificate of Proficiency Programme – ECOP.
While the idea is good, its implementation falls short as it is not being done in consultation with other stakeholders and its efficiency is almost zero if not zero.
Few, if any, of trained people ever join the insurance industry. Why is it being done year in year out yet it has been proven to be ineffective? It’s also getting a huge chunk of the budget at IRA.
Marine insurance, despite the government making it compulsory to take up cover for imports and exports locally, is declining in uptake — a 3.3 percent drop in its uptake compared to last year’s figures.
It should be noted that insurance cover on imports and exports cannot be forced on businesses because it would be going against international trade practices. A question arises whether the law has been amended to compulsory insurance for imports and exports, let alone insuring locally.
Fraud continues to be a major issue in the industry and this report has several sectors reported to have instituted or perpetrated fraud.
The report is confusing and almost meant to demonise a certain section of the industry, where fraud by agents is seen as the highest.
The other group is insurance company employees. This report is likely malicious, may be meant to attract ill-will from the public because the other fraud cases in the report do not show who initiated them yet they form more than a quarter of the tally.
It should be noted that fraud cannot happen in isolation and that more than five groups of industry players are involved, namely the police, insurance investigators, motor assessors, company employees, the clients and garages.
The IRA should learn to give credible reports without demonising anyone.
Washington Ndegea Chairman, Bima Intermediaries Association of Kenya.