Fines to insurers for various breaches, including late payment of claims and failure to submit audited accounts tripled to Sh56.9 million as the Insurance Regulatory Authority (IRA) reins in on errant sector players.
IRA’s latest disclosures show that 10 insurers were hit with penalties in the financial year that ended December 2021 while four also face penalties over breaches committed last year.
The rise in penalties from Sh17.6 million in the preceding year and Sh2.7 million in 2019 comes on the back of increased focus on the sector over the stability of some of its players as customer complaints mount.
Invesco Assurance Company was hit with the highest fine of Sh24.94 million to stay in IRA’s black book over missed deadlines of submitting audited books.
The insurer had 2020 also topped the fines chart with a Sh7.9 million penalty.
Xplico Insurance Company was fined Sh18.9 million for breaching the insurance regulations on submission of unaudited accounts, submission of premium levy and handing in monthly summaries of claims returns.
Takaful Insurance of Africa suffered Sh7.59 million penalty as that of Resolution Insurance (now under statutory management) and Kenya Alliance of Insurance Company hit Sh1.99 million and Sh1.84 million respectively.
Other insurers who have been fined are Trident Insurance (Sh900,000), Pioneer Insurance (Sh290,000), Corporate Insurance (220,000), Sanlam General (Sh200,000) and Monarch Insurance (S32,500).
IRA says four insurers have failed to comply with the requirements of submitting unaudited results and accounts for the third quarter that ended September 2022, setting them up for more penalties.
“This report includes data for all the insurers and reinsurers regulated by the Authority except for African Merchant Assurance, The Monarch Insurance (General), Xplico Insurance and Kuscco Mutual Assurance due to non-compliance with submission requirements,” said the IRA in the third quarter report released last week.
For all their fine words at the time of onboarding customers, insurers have been facing criticism over the refusal or late payment of claims when risk insured materialises.
All the 10 fined insurers except Takaful and Sanlam made it to the top 10 list of underwriters against which 1,686 customer complaints were made in 2021, hinting at a direct correlation between IRA penalties and quality of service.
The 1,686 complaints against insurers surpassed the 1,637 registered in 2020, with delayed payments leading. The same persisted last year with these insurers featuring on the list of those with the highest customer complaints under general and long-term covers.
According to the law, an insurer should admit or deny liability, determine the 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.
The Competition Authority of Kenya (CAK) has been forced to step in for some of the insurers to honour claims payments in the wake of mounting complaints.
The competition watchdog last year forced 18 insurance companies to pay Sh38 million to 20 vehicle repairers and five motor assessors that had been kept waiting for years.
The CAK also, in 2021, fined three insurers— Trident, Kenya Orient and Invesco Insurance— Sh5.5 million for delays in paying 16 motor vehicle garages after fixing their clients’ cars.
The IRA, in 2021, published a proposal pushing for a reduction in the time insurers take to pay claims to within 30 days from the day they are lodged by claimants.
The proposal, contained in the draft National Insurance Policy, wants to cut this period from the current 90 days in a bid to address delayed payments and other challenges that stand in the way of growing insurance penetration in the country.
“Over 70 per cent of complaints by consumers of insurance services concern delayed settlement of claims. Other markets have a period of 30 days on average. The 90-day period is quite long compared to the 30-day period,” says IRA in the draft policy.
