IRA proposes law change as insurance penetration falls

The Insurance Regulatory Authority (IRA) wants an overhaul of underwriting laws amid slowing uptake of covers and mounting losses as the industry lags trends such as technology.

The regulator has been collecting proposals from the public, policy holders and insurers to guide in amending the Insurance Act to make it more responsive to the needs of stakeholders.

The proposals will guide the regulator in reforming the laws to boost penetration in an economy where over 70 percent of annual premiums are collected in Nairobi county alone.

“The key areas of focus include improving access to insurance services through use of technology and enhancing mechanisms for protection of insurance consumers,” said IRA in a notice.

Insurance penetration in Kenya dropped to 2.34 percent in 2019 –the lowest in 15 years- on the back of price undercutting in an industry where players are facing increasingly tough competition.

The reach hit its peak in 2013, when it stood at 3.44 percent, but the rate has been declining in the last five years with a vast population of low income as well as micro and small businesses generally not covered.

The changes to law come at a time the industry is accused of failing to develop innovative means to reach the uninsured.

Industry players note that the number of insurable risks in the market are going up yet premium growth is slowing due to price undercutting and fraud—challenges which partly exist due to low use of technology.

IRA early this year also started the process of reviewing the premium rates in the market as a cure for price undercutting and breach in capital levels.

The new rates will be determined for selected classes of insurance as the regulator seeks to strike a balance between affordability of the covers and stability of insurance companies.