The Insurance Regulatory Authority (IRA) wants insurers to be making payments to farmers who are policyholders without the need for an actual assessment of the loss.
The recommendation is part of a raft of proposals contained in the Insurance (Amendment) Bill, 2018, currently in Parliament with the Finance and Planning Committee.
If approved, this will cushion farmers from poor crop yield and low foliage.
The amendment will introduce index based insurance which will require an insurer to make payment to a policyholder without the need for an actual assessment of the loss once the system triggers such a payment.
“This is to enable the insurers to provide coverage based on a particular index such as rainfall in case of crop insurance, and foliage in the case livestock insurance. Such insurance will protect farmers from poor crop yield and low foliage,” said the regulator.
Several insurance companies have been launching covers for livestock and crops such as maize, sugar cane, wheat, barley, rice, tea, coffee, vegetables and flowers, but uptake still remains low.
This has been attributed to low literacy levels, high cost of production, the complexity of weather-index-related insurance schemes which have locked out many small-scale framers from coverage.
The regulator wants the new law to provide a definition of micro-insurance business as a policy that is accessible to low-income population.
This definition is meant to pave way for the rolling out of micro-insurance regulation that will provide the legal framework for supervision of micro-insurance.
IRA also wants the commissioner of insurance to be given powers so that he can give direction to any member of an insurance group under the group wide supervision.
This is meant to enable proper supervision of members of the group companies where one is an insurer, especially where the operations of any group member poses a risk to the insurer.
Policyholders are also expected to benefit if a proposal to facilitate expeditious settlement of the claims and protection of policyholder’s benefits is approved.
Currently, under the Insurance Act, the policyholders are required at the maturity of the policy term to publish in the Kenyan Gazette before they can be compensated where the policy document is lost.
This leads to delay in settlement of the claim and reduced benefit to the policyholder especially where the amount claimed is relatively low.
“This amendment, therefore, removes such a need and replaces it with the swearing of affidavit by the claimant,” said the regulator.
The proposed amendments, will further strengthen the principle of cash and carry by proposing that payment of insurance premium be made directly to the insurer.
Additionally, the commission payable to all intermediaries be paid by insurers within 30 days.
Data from IRA on premium payment shows that there is about Sh41 billion which is owed to the insurers, accounting for about 20 per cent of the premiums written in 2017.
“This amendment is to safeguard the interest of policyholders by ensuring that premiums are remitted directly to the insurers,” he notes.