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Bancassurance firms fall 70pc on strict rules


Insurance Regulatory Authority CEO Godfrey Kiptum. FILE PHOTO | NMG

The number of banks selling insurance products has declined 70 percent to eight lenders following regulatory reforms in the sector.

Latest Insurance Regulatory Authority (IRA) data shows the number of lenders offering insurance fell from 27 in 2021.

Now only ABSA, DTB, Faulu, KCB, Rafiki, Sidian, Stanbic, and U&I are listed as licensed as bancassurance firms.

The sharp decline comes as the regulator introduced new rules in the sector requiring bancassurance companies to increase minimum capital to Sh5 million which is higher than what is required of brokers (Sh1 million) and raised registration fees from Sh1,000 to Sh20,000.

The bancassurance firms must also provide a Sh10 million bank guarantee or a government bond.

IRA also directed that the lenders must own 100 percent of the bancassurance agents, obtain collaboration agreements with insurance companies and prominently display the name of the underwriters in any advertising feature.

The principal officer operating the agency for the banks now has to pass a fit and proper test and must be technically qualified in insurance, actuarial, accounting and banking.

The regulator says some of the lenders have not complied with the new rules and while they have only published the eight who are fully compliant, by last week they were in the process of approving 19 lenders.

“It is linked to the regulatory changes. By last week we had about 19 firms in the process of compliance,” said IRA chief executive officer Godfrey Kiptum.

Since 2004 when the Central Bank of Kenya granted the Commercial Bank of Africa (now NCBA) license to operate bancassurance business, the sector has attracted more banks and microfinance players.

These included Equity, KCB, NBK, Barclays Bank, CBA, Stanbic, Standard Chartered, Jamii Bora, Cbl, Chase, Co-Op consultancy, Credit Bank, Diamond Trust Bank (DTB), Eco, Family, Faulu, HF, I&M, Kwft, Letshego, Miasha, Parabank, Rafiki, SMEP, U&I, Unaitas and Sidian.

Equity Bank was also previously an insurance agent but has since ventured into the insurance business rolling out a life policy business.

The new regulations will now limit a bancassurance company to seek approvals before selling any products to their customers.

They will not be allowed to deduct premiums from their customer accounts without prior written consent.

Before selling insurance the bancassurance agents must in writing inform you can select your own underwriter and should not advise or coerce you to cancel an existing policy. They should also not stop you from looking for a bancassurance company of your choice or choosing to deal directly with the insurance firm.

They should also ensure the confidentiality of customer data and address complaints promptly.

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