Passengers and motorists involved in accidents where the drivers had expired licences will qualify for insurance compensation under proposed rules that also allow customers with unpaid premiums to enjoy coverage, as the regulator seeks to curb arbitrary rejection of claims.
The draft Insurance (Claims Management) Guidelines, 2025 introduces strict timelines for claim processing, bans unreasonable grounds for rejecting claims, and imposes stronger customer service obligations on insurers.
If adopted, the guidelines by the Treasury will require insurers to compensate drivers whose licences may have expired at the time of an accident, provided they were not disqualified from holding one.
Policyholders often face arbitrary rejection of claims, with insurance firms offering divergent reasons for their decisions.
The Treasury has spelled out in the proposed rules a list of “unreasonable or unfair grounds” that insurance companies can no longer cite when rejecting claims.
Insurers will not be allowed to decline claims from incidents that have been reported late without considering and documenting the reasons for the delay.
Claims will also not be rejected due to non-payment of premiums where the insurers had not cancelled the policy or where cancellation was done by brokers and agents without notifying the policyholder.
The guidelines also bar insurers from rejecting claims on non-disclosure of facts customers could not reasonably be expected to know or innocent misrepresentation that is neither fraudulent nor negligent.
Undiagnosed pre-existing medical conditions will not be used to reject claims, notably life covers.
Insurers will also lose the right to reject claims based on breach of conditions if the terms of the policy were not provided to the customer.
The rules are aimed at protecting policyholders while improving the image of an industry that has long faced criticism over delayed or rejected claims.
Many insurers have been relying on technical grounds to reject legitimate claims.
“The objective of these guidelines is to ensure prompt payment of claims and promote consumer confidence in the insurance industry,” the draft guidelines say.
Insurers see the proposed guidelines as a mixed bag and are currently deliberating before taking a position through their umbrella body, the Association of Kenya Insurers (AKI).
“Currently, insurers make their own assessments, usually based on the uniqueness of each case at hand. Having the grounds for not rejecting claims spelled out is a mixed bag for the industry,” said William Kiama, the AKI manager for general insurance business.
“For instance, reporting a claim late may, in some circumstances, mean the insurer cannot collect any evidence to determine whether they are dealing with a genuine claim.”
Mr Kiama said while many insurers may not have a problem with settling a claim for drivers with expired licences, doing so for those whose premiums they have not received would be impractical.
“We understand the spirit of the guidelines is for consumer protection, but it should also strike a balance with the industry’s ability to fairly assess and manage risks. Our members are still going through the draft up to November 5, after which we will state our position,” he said.
IRA data shows complaints against insurers rose for the fourth straight year to 1,962 in 2023, surpassing the 1,878 in the previous year. Delayed settlement of claims accounted for 1,045 or 53.3 percent of the complaints, followed by 370 cases of denied claims (18.9 percent) and 227 cases of unsatisfactory compensation (11.6 percent).
In the half year ended June 2025, insurers rejected claims worth Sh1.51 billion compared with those worth Sh879.85 million that were declined in a similar period last year.
Kenya’s insurance penetration rate — the ratio of premiums to gross domestic product — remains below three percent compared to the world’s average of seven percent, despite the country’s relatively mature financial sector.
The new guidelines also aim to rein in the delays in claims settlement, which has seen many Kenyans view insurance as a last resort product rather than a financial safety net.
If adopted, insurers will be required to acknowledge receipt of claim notifications within two working days and to provide clear instructions on the documents needed for processing.
Once all required documents are received, insurers will be required to acknowledge this within another two days and settle the claim immediately if the liability is clear.
If further assessment or investigation is required, the insurer will be required to appoint an insurance service provider, such as a loss adjuster or investigator and communicate this to the claimant.
Once the assessment or investigation report is received, the insurer will have seven days to make an offer or communicate the rejection, complete with reasons.
The proposed guidelines also seek to standardise how motor vehicle valuations are done.
All vehicles must be valued at policy inception and upon renewal, with the valuation forming the basis for determining compensation.
This proposal aims to eliminate disputes arising from undervaluation or inflated depreciation during claims.
The provisions effectively strengthen consumer rights and limit insurers’ discretion to reject claims without clear justification. They will also speed up the claims settlement process.
Insurers will be required to develop detailed claims handling procedure manuals—covering every step from notification to settlement for all classes of business. The manuals will include expected timelines for each stage and define internal controls and reporting systems.
Insurers will also be expected to update customers regularly on the progress of their claims and to establish a well-resourced customer service function to handle queries and complaints.
