Insurance agents accuse banks of abuse

Insurance agents want commercial banks barred from demanding that customers take up insurance cover through selected agencies before getting loans.

Through their lobby, Bima Intermediaries Association of Kenya, the agents the Insurance Act amended to tighten rules on bancassurance.

HAVING A ROUGH TIME

Banks were allowed to sell insurance products — a practice known bancassurance — in 2010 through change of the law, but agents complain of being edged out of the market by the banks’ preferred agents.

“Insurance agents are having a rough time. Banks are forcing customers to take insurance through certain agencies when they go for loans. Many agents have lost clients they have nurtured over the years,” Bima chairman Washington Ndegea.

The regulator, Insurance Regulatory Authority, in November 2010, issued guidelines on bancassurance, which prohibit banks from using coercion to get clients.

“The insurance agency or bank shall not induce or compel in any form a prospect to buy an insurance product of its principal. All prospects, including staff of the bank, should be allowed to decide which insurance product they wish to buy,” the 2010 circular said.

Agents say they sell over 70 per cent of premiums in the industry, but their position is being threatened by the new methods banks are employing to win clients.

The insurance industry, which has been growing albeit slowly, has been finding new ways to reach more people with various products, particularly through use of ICT platforms for remittances of premiums and payment of claims.

Bancassurance is one of several ways introduced to entrench insurance products — whose take-up is at a paltry 3.01 per cent. The regulator has, in the past, said that more outlets will be increased to expand insurance cover in the country.

“We expected banks to find innovative ways to reach out to new clients and assist the industry to grow further. But what we are seeing is outright misuse of their positions and disregard of the guidelines on bancassurance,” Mr Ndegea said.

POSITION THREATENED

There are about 4,000 registered agents across the country, with another 1,000 operating illegally. The agents have largely operated without any association.

Mr Ndegea said the association is enhancing self-regulation to flush out illegal agents and ensure policy buyers are not disadvantaged through misselling (misleading of material facts or concealment).