•During the 2018/19 budget reading CS Henry Rotich proposed to amend the Insurance Act to require payments of insurance premiums directly to insurance companies
•Insurers claim that at least Sh40 billion is yet to be remitted by brokers stunting the rate at which firms can pay claims
The criminalisation of premiums handling by insurance agents and brokers may spell doom for the industry moving forward, the intermediaries have said.
On Tuesday, MPs passed Insurance (Amendment) Bill 2018 to completely bar underwriting agents and brokers from collecting premiums from policyholders.
This means clients will have to pay premiums directly to insurance firms after negotiating with the insurance middlemen.
In his 2018/19 budget statement, National Treasury Cabinet Secretary Henry Rotich proposed to amend the Insurance Act for direct payments of insurance premiums to insurance companies.
BIMA intermediaries chairman Washington Ndegea yesterday said criminalizing of premiums handling will make it impossible to do insurance business rendering thousands of agents and brokers jobless.
“The mere touching of a client’s cheque will be a criminal offense. That is responding to a mosquito bite with a hammer,” he said.
He said the move which is aimed at ensuring underwriters have enough capital to settle insurance claims may be counterproductive.
Ndegea said once the law comes to play Kenya Revenue Authority will no longer collect withholding tax on agency and brokerage commissions which run upwards of Sh3 billion.
Insurers claim that at least Sh40 billion is yet to be remitted by brokers slowing down the payment of claims.
But insurance intermediaries said of the 50 licensed insurers in the country more than ten insurance companies are not paying claims, whether by default or otherwise.
“They are simply not paying claims because they have mismanaged their finances. In any way the Insurance Act is very strict on the non-payment of premiums by intermediaries’ and their licenses are at stake should one fail to pay,” Ndegea said.
Association of Insurance Brokers of Kenya chairman Nelson Omolo, however, told the Star, the number being floated around may be misleading as most of these funds are monies owed by the clients through the brokers.
“We want to see if these allegations actually hold water as this law comes into effect,” he said.
Omolo said once it is effected, the new act will have a negative impact on the insurance industry, shrinking an already low national penetration level.
“The new law is not favourable for us (brokers),” he said.
Omolo said most insurance brokerage firms will have to restructure their labour force meaning a number of job losses as roles such as accounting and bank reconciliation will be rendered obsolete. These tasks will be reverted back to the insurance firms.
He said there is no single company that has complained of delayed premiums or named any that is holding onto premiums.
According to the insurance middle-men, the state should instead introduce a penalty under Section 156 to address the issue of any embezzlement of premiums.