Resolution Insurance collapsed with Sh6.5 billion in client cash, insurance claims, and creditor funds after its shareholders failed to recapitalise the business.
The insurer had collected Sh4.1 billion in premiums out of which 90 per cent ( Sh3.5 billion) were medical customers, exposing Kenyans who paid to cover medical expenses without reprieve.
The fund said the response rate has been the best since it started compensating customers of collapsed insurance companies last year.
Only 50 policyholders of Resolution Insurance have filed for compensation from the state in the first week following the announcement Policyholders Compensation Fund (PCF) to start processing claims of the collapsed insurer.
PCF issued the notice last week to fast track payments of up to Sh250,000 to Resolution customers due to the urgency of meeting medical claims.
Resolution Insurance collapsed with Sh6.5 billion in client cash, insurance claims, and creditor funds after its shareholders failed to recapitalise the business.
The insurer had collected Sh4.1 billion in premiums out of which 90 per cent ( Sh3.5 billion) were medical customers, exposing Kenyans who paid to cover medical expenses without reprieve.
The fund said the response rate has been the best since it started compensating customers of collapsed insurance companies last year.
“We have thus far received and accepted 50 claims. This is a good response rate given the poor turnout experienced in the past,” PCF Managing Trustee William Masita said.
Since 2005, insurance companies and policyholders have collected Sh15 billion under PCF to be utilized whenever an insurance company collapses.
Insurance companies contribute to PCF through the payment of a levy equivalent to 0.25 per cent of their premium receipts.
Resolution insurance becomes the first company to immediately get compensation following a change in law that paved the way for payment to policyholders immediately an insurance company goes down.
Concord clients started getting paid last year since it collapsed in 2013 while Standard Assurance which collapsed in 2008 has just began getting paid.
This has led to a very low turnout of policyholders with only 90 Concord policyholders filling claims since last year out of the expected 1500.
PCF has paid out 39 Concord policyholders and rejected 5 claims, the rest are still being processed.
Over the years Blue Shield Insurance, United Insurance Company, Standard Assurance Company, Concord Insurance Company, Access Insurance Company, Stallion Insurance Company Ltd and Lakestar Insurance Company all went under with policyholders' claims.
They were put on receivership but their shareholders and the regulator have been caught up in endless litigation leaving policyholders to wait decades without recovering their money.
The law was changed so that when an insurance company is unable to pay claims, the commissioner of insurance will either take away the company license or place it under statutory management and PCF will immediately start the process of compensation
The change in law, however, would not apply retrogressively meaning legacy failures have to wait until the court liquidated them to issue compensation to shareholders.
“The impact of this will be faster clearance of claims, the response rate will be higher because the passage of time will be shorter. It will be like processing live claims for the companies,” Mr Masita said.
Resolution clients with the biggest exposure include those who had insured high-value assets such as motor vehicles, houses and industrial properties.
Customers with medical bills will have suffered as they have been forced to pay out of pocket whi;le awaiting compensation.
The Insurance Regulatory Authority has capped claims in collapsed insurer at Sh250,000 as provided for in law.
Clients of the collapsed insurer will be expected to provide proof of their claims.
Creditors and those with higher value claims are expected to wait for the liquidation of the business to access their cash.
