Economy

Nine insurers fined for late payment of claims and audit submission

insurance

Nine insurers have been fined Sh17.6 million for late payment of claims, failure to submit audited accounts and premium levy payment as the Insurance Regulatory Authority starts publishing names of companies it has punished.

The IRA’s annual report shows that insurance companies were notorious for failure to pay insurance claims with four out of the eight companies having been penalised for delayed payments.

Invesco Insurance was slapped with the highest fine of Sh7.9 million for delayed payment of claims followed by Keninidia Assurance (Sh1.0 million), Kenindia (Sh1 million), Kuscco (Sh161,739) and Kenya Alliance Sh51,547.

Metropolitan Cannon was fined Sh1.3 million, Takaful Insurance (Sh330,000) and Trident Sh3 million for late audit submissions while Resolution (Sh3.2 million) and Explico Insurance (Sh510,000) were fined for failure to pay the premium levy.

The IRA’s push to disclose fines on insurance companies that fail to pay customers comes at a time of increasing cases where patients are turned away from hospitals because their providers fail to settle medical bills.

According to the law, an insurer should admit or deny liability, determine amount, identify the claimant and pay within 90 days.

A company can request a 30-day extension and failure to pay within the set deadlines attract a five percent penalty on the unpaid amount.

"Where the amount of claim which is due remains unpaid on expiry of the period prescribed, or any extension thereof, a penalty equal to five percent of the unpaid amount shall forthwith become due and payable," the Insurance Act reads.

Late payments have limited the capacity of the insurance sector to grow beyond compulsory motor and health insurance as customers fear insurance companies will avoid payment when their risks occur.

Resolution Insurance, for example, has been on focus after the insurer’s cover was rejected by some hospitals for late settlements of bills.

The Insurer’s acting managing director Bernard Githinji admitted it has been having trouble clearing its customers at Nairobi Hospital over an unsettled bill of Sh9 million.

He said the company is seeking more than Sh2 billion from shareholders to bridge cash flow problems and was expecting an injection from shareholders in December.

Resolution Insurance has come under fire as clients post frustrations on social media over their inability to access medical attention as a result of their cards being rejected.

The complaints have laid bare the cash flow constraints at the business that has seen the company get the second-highest number of complaints at the Insurance Regulatory Authority.

The resolution had 30 complaints just behind Xplico with 43 client complaints while Trident had 25 customer issues according to the IRA quarterly report released in June.

The three insurers recorded a quarter of the 459 insurance complaints filed at the regulator in the six months under review.

There have also been increased complaints against insurance companies from motor vehicles garages and loss assessors for delayed payments.

The Competition Authority of Kenya (CAK) recently revealed it forced Trident, Kenya Orient and Invesco to pay Sh5.5 million to 16 motor vehicle garages for delays after fixing their clients’ cars.

CAK compelled Kenya Orient Insurance to pay Sh1.2 million, Invesco Sh2.3 million and Trident Sh2 million for delays in payments for repairs, some of which were done eight years ago.

Invesco and Trident are still delaying in settling the late payments even after the CAK intervention, the anti-trust agency said.

Garages lobby Kenya Motor Repairers Association (KEMRA) which has 168 members says, unlike hospitals, they cannot turn away insurance cars since the industry controls a huge chunk of the market.

Up to 80 percent of the business conducted by garages emanates from insurance companies, further entrenching their economic dependency on 38 listed motor insurers.

The garages’ only option has been to file cases at the CAK for abuse of buyer power and hope they get paid.

However, the regulator found the insurance companies had abused buyer power unilaterally drawing lopsided contracts, delay of payments without justifiable reasons as well as constructive termination of contracts by the three companies.

"The insurance companies had stopped allocating work to the complainants without any communication to them or giving reasons. The Authority concluded that the insurance companies had buyer power with regard to the 16 members of KEMRA and that they abused this position by delaying payments without any justifiable reason and delisting the complainants," CAK director-general Wang’ombe Kariuki said.

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