A row has emerged between insurance firms and underwriting agents with the intermediaries accusing insurers of coercing their clients into dealing with banks.
Bima Intermediaries Association of Kenya yesterday lamented that one of its members had been shortchanged by a senior employee at CIC Insurance Company Limited, enticing the client with lower rates offered in bancassurance compared to the agent’s rate.
“The client who paid the first installment of Sh30,000 through the agent at a rate of 6 per cent later learnt that he could get a lower rate from CIC at 4 per cent, but that he needs to get insurance from the bank to enjoy that rate,” BIAK managing director Washington Ndegea said.
He said this particular act by CIC is against guidelines issued by the Insurance Regulatory Authority on the operation of insurance business.
Under amendments made to the Insurance Act of May 4, 2017, the section on bancassurance provides that lenders found to be in violation of the underwriting requirements are liable to a fine not exceeding Sh5 million upon conviction or a five-year jail term.
“The bank in this case is not at fault because they didn’t instigate the cancellation,” Ndegea said.
When contacted, CIC refuted the claims adding that such an action would cast the company in bad light given that both independent agents and banks are key contributors to their business. “We do not do that, the customer is the one who decides where they want to go,” CIC Insurance marketing director Joseph Karimi told the Star. “It’s not about the rates but rather the services being offered by the different entities.”
IRA, which has yet to comment on the matter, is also mandated to punish anyone in violation of the standards of conduct of insurance and reinsurance business with a fine not less than Sh5 million and or a five year jail term.
Ndegea said that the malpractice, which was not uncommon in the industry, has tainted insurance agents as cons, robbing them of rewards for their labour adding that this would eventually result in an industry slowdown.
The agents are now wary that cheaper rates offered by banks will gravely undermine their business.