Households and businesses could soon pay more for insurance cover as the Insurance Regulatory Authority (IRA) moves to raise annual fees for insurers, brokers, agents and other intermediaries for the first time in 30 years.
Under the IRA proposed insurance regulations and guidelines, the license fees and annual operating fees for insurance and reinsurance companies will rise 3.3 times and three times respectively. The draft is also proposing to increase the annual fees for intermediaries such as agents, brokers and risk assessors by up to 10 times.
The National Treasury's regulatory impact assessment report on the proposed changes says the increased fees —the first since 1995— will raise operational costs for insurers, reinsurers and intermediaries, with part of the cost likely to be passed on to policyholders.
“It is likely that the regulated entities may pass on the increased costs to policyholders, thereby increasing the cost of accessing insurance,” the report states, noting that smaller players may face greater financial pressure in adjusting to the new fee structure.
Under the proposals, the license fee for insurance companies will rise 3.3 times to Sh500,000 from the current Sh150,000 while that of reinsurers will rise three times to Sh750,000 from Sh250,000. The annual renewal fees for both categories will rise by similar proportions.
Insurance brokers and medical insurance providers will each pay Sh100,000 annually, up 10 times from Sh10,000, while bancassurance intermediaries’ fees will rise to Sh200,000 from the current Sh20,000.
Individual agents will pay Sh5,000, up five times from Sh1,000, while corporate agents’ fees will rise to Sh10,000 from Sh1,000.
Agents are key drivers of insurance business alongside brokers. IRA data for 2023 shows agents accounted for Sh179.7 billion or 49.9 percent of premiums earned by insurers while brokers accounted for 30.3 percent or Sh109 billion.
Other intermediaries and service providers such as risk managers, motor assessors, Insurance investigators, loss adjustors, insurance surveyors and claims settling agents will pay Sh10,000, being 10 times higher than the current Sh3,000.
The Treasury says the adjustment —the first since 1995— reflects both inflation and the expanded scope of the IRA’s supervisory mandate. The Consumer Price Index has grown more than eightfold over that period, while the number of regulated entities has surged from about 529 to nearly 15,000.
“The current license fees for insurance companies and intermediaries were last revised in 1995,” Treasury says in the assessment report.
“Since then, the size, complexity and risk profile of the insurance industry have grown exponentially, requiring substantial resources to effectively discharge the Authority’s mandate.”
Treasury says a regional comparison shows Kenya’s current license fees are significantly lower than those in Uganda and Tanzania, despite the country’s more developed market. However, the proposed fees will make Kenya costlier.
For instance, agents in Uganda and Tanzania pay about Sh3,500 and Sh2,500 respectively. Brokers in Uganda pay about Sh13,900 while those in Tanzania pay about Sh38,700. This means Kenya’s proposed Sh5,000 for individual agents and Sh100,000 for brokers will see Kenya leapfrog her neighbours.
Insurers and reinsurers in Kenya were already paying higher license and annual fees at Sh150,000 and Sh250,000 respectively.
This means the proposed rise in the two costs will increase the gap with Uganda and Tanzania where insurers and reinsurers pay a flat rate of Sh139,000 and Sh129,000 respectively.
“Considering the depth and diversity of Kenya’s insurance industry compared to its EAC peers, it is considered prudent that higher license fees ought to be charged in the Kenyan market to cater for the higher cost of supervision and enforcement,” says Treasury.
The additional revenue will fund the IRA’s 2023–2027 Strategic Plan, which outlines a Sh14.6 billion programme to digitise supervision, open regional offices, enhance fraud detection and promote consumer education and innovation.
The Treasury argues that a better-resourced regulator will ultimately help stabilise the market, build consumer trust and encourage innovation in new products such as agricultural, cyber and virtual assets insurance.
