advertisement
Companies

Insurers push for law change, instalment payments to grow uptake

 

Association of Kenya Insurers (AKI) is pushing its members to offer covers on credit terms based on customers’ debt repayment profile.

This arrangement requires changing the law the stipulates upfront payment of premiums for any cover to be deemed effective.

Chief Executive Tom Gichuhi said the regulations should be tweaked to incorporate instalment payments to make insurance more affordable to customers, especially for products such as comprehensive motor covers.

“Many people want insurance but they can’t afford it. So you either give it on credit or allow them to pay in instalments or work closely with actuaries to develop short-term covers,” he said.

“Nothing is cast on a stone. We can open discussions with the Insurance Regulatory Authority to change the law and have the idea tested before full roll-out.”

advertisement

Firms such as Resolution Insurance have come closer to this by allowing customers flexible monthly instalment payments by taking premium loans from its credit wing, Resolution Credit. This allows its customers to enjoy cover benefits immediately.

Insurers will have to rely on the services of Credit Reference Bureaus (CRBs) for customers’ credit ratings before deciding to offer them room to make piecemeal payment of premiums.

“One way of controlling debtors will be to make use of CRBs so that customers who fall back on payments are listed just like it happens with bank customers. Those in default will not access insurance from any other insurer,” said Mr Gichuhi told the Business Daily.

Kenya has three CRBs — Transunion, Metropol and Creditinfo — licensed as aggregators of consumer credit history but mainly serve banks and saccos.

Jubilee Insurance Group CEO Julius Kipng’etich said the proposal is welcome and would support other innovations in pulling insurance penetration from a 15-year low of 2.43 per cent.

He said cash-and-carry regime that requires premiums to be paid upfront before a cover is issued limits payment options for customers.

“Working closely with banks and telcos can greatly assist in closing this gap and reducing the default rate of premium payments,” he said

advertisement