MPs plan to peg fines and penalties for insurance firms and managers who flout regulations on the value of the amount misappropriated.
The move comes on the back of collapses within the insurance sector raising concerns about its stability and prompting a closer examination of safeguards.
This is among the new changes that MPs want included in the Insurance (Amendment Bill, 2023) pending a major overhaul of the insurance regulations in Kenya.
In the amendments proposed by Majority leader Kimani Ichungwah, the provisions had proposed changes that provided for individuals found to have misappropriated funds to be fined an amount not exceeding Sh5 million or a jail term not exceeding two years.
This would also see firms found to have misappropriated funds belonging to clients fined Sh10 million.
By placing responsibilities squarely on the people running the show, the draft law aims to promote accountability, uphold fiduciary duties, and ensure the senior managers meet professional responsibilities.
However, the departmental committee of Finance and Planning said that the figure should be pegged on a minimum amount and not a maximum only.
"What if the insured value is more than this Sh5million and an employee diverts this, the proposal says they will only be fined amount not exceeding Sh5 million,” asked the committee chair Kimani Kuria.
He added that the National Assembly has done 52 patchwork amendments to the bill prompting the need to overhaul it and come up with a new proposal.
Many insurers in Kenya have faced sustained customer complaints over delays in paying claims, with some collapsing with customers’ money.
Insurance Regulatory Authority boss Godfrey Kiptum confirmed that the amendments are a stopgap measure as plans to completely overhaul the regulations are on course.
He noted that amending Insurance Act cap 487 would provide for offences and penalties relating to insurance companies.
“There is a proposal to re-amend the law, this is just a stop gap measure before we get the law repealed and have a new one enacted. We had a draft law [which] stalled but we are now backing it up,” Kiptum told MPs.
Kuria said that in the next two months there would be a stakeholders’ engagement with the insurance sector to look at the entire Insurance Act.
“We will have to re-look at all those ambiguities and come up with an Insurance Act of 2023 that is cognisant of the many changes that we have had in insurance sector in the last 35 years,” said the MP.
