CRACKING THE WHIP

IRA to de-list 14 brokers, wants commissions and premiums paid

Brokers were holding Sh43 billions collected from customers last year.

In Summary

•The Insurance Regulatory Authority last year sent a circular to 44 firms inquiring on the status of outstanding premiums.

•The regulator has also asked insurance companies to clear commissions owed to insurance agents to cushion them from the financial strains brought about by Covid-19.

An Insurance Regulatory Authority(IRA) stand at a recent conference in Nairobi.
An Insurance Regulatory Authority(IRA) stand at a recent conference in Nairobi.
Image: COURTESY

Fourteen insurance in the country risk delisting for holding onto premiums running into billions of shillings.

The Insurance Regulatory Authority (IRA) yesterday said the firms have failed to respond to its inquiries on the pending payments.

This is despite a circular sent out last year to 44 firms inquiring on the status of outstanding premiums and payment terms.

 

“Fourteen did not respond to our circular. We are working on that and they are subject to de-registration,” IRA acting chief manager-technical, Kalai Musee, said.

As of last year, insurance brokers were holding about Sh43 billion collected from customers but not remitted to underwriters as required. 

These included Sh42 billion and Sh1 billion for general insurers and life insurers respectively, which is about 19.8 per cent of the Sh216.2 billion gross premiums underwritten in 2018.

There were 52 insurance companies, three re-insurance firms and about 221 brokerage firms in the country as of last year.

However in February this year, 82 brokerage firms were denied operating licence for failing to remit outstanding premiums.

A number have spelled out payment plans, IRA said yesterday during a webinar on the impact of Covid-19 on the sector.

“If they don't submit premiums, they face de-registration,” Kalai said.

 

In case a brokerage firm ceases operations, claimants can be paid using the Sh3 million minimum bank guarantee.

Meanwhile, the regulator has asked insurance companies to clear commissions owed to insurance agents to cushion them from the financial strains brought about by Covid-19 , which has disrupted business.

There are over 10,000 insurance agents accounting for 70 per cent of the average Sh220 billion annual underwriting in the sector.

This translates to about Sh154 billion worth of premiums that is attributable to agents.

On a lower side average of 20 per cent , agents take home an estimated Sh30 billion cumulatively from the industry annually.

Currently, 80 per cent of staff in the insurance industry are either working from home or unable to sale as a result of restriction of movement and Covid-19 spread concerns by businesses and households.

These agents are at home and even if they move, nobody is allowing them into their homes. They(agents) need to be paid their commission to help them during this time,” Kalai said.

In a separate interview with the Star, Bima Intermediaries Association of Kenya, an umbrella body representing insurance agents and intermediaries in Kenya, called on insurance firms to set a side a kitty to support agents.

Chairman Washington Ndegea said the monies can be disbursed in form of a grant, and can be recovered in future when business stabilises.

“Agents are the biggest contributors to the insurance businesses, they need the companies support right now. Majority are facing financial distress and it will only be fare if they are cushioned,” Ndegea said in a telephone interview.

The insurance sector has not been spared by Covid-19 which has rendered millions jobless.

According to IRA, the industry is facing policy cancellations, individuals failing to pay monthly premiums as a result of financial strains, and insurance companies struggling to pay claims.

Motor insurance segment has also been hit by cessation of movement into and out of Nairobi and other parts of the country as hundreds of PSV ceased operations.

“Towards the end of July, we will be able to produce statistics,” said Robert Kuloba, chief manager-policy, research and development.