Automation challenges has slowed the uptake of local marine cargo insurance, according to the Insurance Regulatory Authority.
IRA acting chief executive Godfrey Kiptum told the Star that KRA is still experiencing instances where importers use foreign insurance policies.
KRA requires importers to use the Kentrade portal linking the insurer and owner of the goods as the only means of transacting marine insurance.
In addition KRA requires marine insurance cargo to be handled through a technology platform for the Marine Cargo Insurance (MCI) certificates are available online to facilitate cargo clearance.
“There are also instances where imports have foreign contracts and this is where approval has been granted by the Commissioner of insurance,” he said.
If an importer fails to purchase a local marine insurance policy, the taxman is mandated to add 1.5 per cent of the cargo value for tax purposes.
“Accessing details of importers in breach of section 20 of the insurance Act has been a challenge,” said Kiptum.
Under Section 20 of the Insurance Act which took effect in January 2017, all importers were mandated to insure their shipments locally to boost the local underwriting industry.
Since then, marine cargo insurance premiums have grown 34.77 per cent to Sh3.5 billion from Sh2.6 billion in 2016 with value of claims reported since the law was effected stand at Sh725 million.
Despite registering significant growth, Marine Cargo Insurance is still far from meeting its intended target of collecting Sh24 billion worth of premiums annually.
In order to collect Sh24 billion annually from marine cargo insurance, underwriters have to collect premiums ranging between Sh150-Sh250 million per month.
Shippers Council of East Africa chief executive Gilbert Langat said lack of inclusion, low awareness and poor implementation strategies were other reasons jeopardizing local marine cargo insurance uptake.
“Uptake of marine cargo insurance is still very low because of implementation issues,” he said. “Each player in the insurance industry wants a piece of the cake without working together.”
Langat believes the estimated Sh24 billion in premiums only accounts for 40 per cent of cargo coming into the country.
“If every importer is to buy insurance, gross premiums from marine cargo insurance could be in the upwards of Sh50 billion annually,” he said.
There are currently 34 Marine Cargo insurers with a capacity of over Sh23billion, with six reinsurance firms providing backup to the insurers.
Kiptum said he was optimistic about the marine insurance sub-sector moving forward adding that firms had demonstrated sufficient capacity, providing internationally competitive and flexible policies.
“The marine cargo insurance business is expected to grow and with the sealing of the current gaps arising from inadequate automation, better results are expected,” he said.