Letters

LETTERS: Proposed law puts insurance sector on deathbed

insure

Insurance sales agents and brokers during a training programme. PHOTO | DIANA NGILA

In 2018 Treasury Secretary Henry Rotich strode to Parliament carrying the characteristic briefcase just in time to read the budget for the current fiscal year.

Expectations were high, that the prices of various basic commodities would reduce, and that we in the insurance industry would get the much needed relief and create an enabling environment to do business.

The issue of the prices of the basic commodities were met, but we in the insurance sector were left reeling by the recommendations in the Insurance Act in form of Insurance (Amendment) Bill 2018, that it would be criminal to handle insurance premiums from then on if the recommendations were to be made law.

We quickly called an emergency meeting to look at what could have prompted the Treasury to come up with such proposals, even while noting that Section 156 of the Insurance Act catered for that.

It was agreed that the insurance intermediaries, to which this was addressed, were to quickly come up with a counter proposal and present to Parliament when the issue would come up for debate after the Second reading of the House.

We felt that the proposals as fronted by Treasury would negatively affect insurance penetration in this country. We also noted that there was no stakeholder involvement in this proposal and it caught everyone by surprise.

We would have preferred that a penalty be introduced to address the issue of any embezzlement of premiums. We were happy when our proposals were accepted by Parliament.

That was until the Bill came up to the President with our recommendations and he refused to assent. What that means is that premiums handling is going to be a criminal offence. Not embezzlement as would have been expected, but the mere touching of a client’s cheque will be a criminal offence.

That is responding to a mosquito bite with hammer. The only reason the President gave for refusing to assent to our proposals was that by allowing for the handling of premiums by intermediaries, it will negate the principal of Cash and Carry which will in turn affect the ability of companies to pay claims since most of the premiums will be with the intermediaries.

At this point it would be good to point out that over 10 insurance companies in Kenya are not paying claims, whether by default or otherwise. Yet none has complained of delayed premiums or in effect named any of those that could be delaying their premiums. They are simply not paying claims because they have mismanaged their finances. In any way the Insurance Act is very strict on the non-payment of premiums by intermediaries’ and their licences are at stake should one fail to pay.

It is also important to point out that since the entry of banks into the insurance field a lot of bad blood has been created, mainly caused by the banks encroaching on and forcing our clients to take up insurance with them. Our cries to the IRA have fallen on deaf ears even when we point out that they are doing insurance business in unorthodox manner.

Insurance broking has given them free money to trade with in form of premiums. Banks never remit insurance premiums to insurance companies unless when forced to do so.

Any insurance company doing business with a bank can attest to this. They simply do not follow the insurance rules as stipulated. Why they are never penalised or chastised is any one’s guess. The only gainers of this action by the President is the banks because insurance will only be done by them and from past experience they will not follow the rules laid down by IRA.

The import of the Presidents refusal to assent to the Insurance (Amendment) Bill 2018 has a number of grave implications. At the top is stalling the growth of insurance in this country. We all know that the growth of insurance since independence and even before independence has been largely effected by insurance agents and who have always been in their thousands.

By criminalising premiums handling, it will become impossible to do insurance business as it is akin to selling your wares while you have closed the door. The many thousands of intermediaries will have to look elsewhere for a job.

Why is the government creating unemployment and going against their Vision 2030 objectives?

Washington Ndegea, chairman, Bima Intermediaries Association of Kenya