Premium remittance by employers needs streamlining

A caring employer will encourage employees to the prudent habit of regular saving and protecting their families such as through life insurance. Indeed, this is the reason why most employers have facilitated check-offs for life insurance premiums. PHOTO | FILE

What you need to know:

  • Although it is true the employer and insurer have an agreement for co-operation, this is engendered by goodwill with employers facilitating check-off to enhance their employee’s social welfare.
  • A caring employer will encourage employees to the prudent habit of regular saving and protecting their families such as through life insurance.
  • The premium revenue stream has been disrupted for many life offices. In turn, this affects the investment activity.

Upon taking insurance through the check-off system, normally employers are supposed to remit the deductions to insurers.

Now, a situation has arisen where an employer deducts premium in the pay slip but fails to remit the same to the insurer in time, resulting in arrears on the policy.

This raises disputes between the insured and insurer because the former takes this to mean that the insurance company is scheming to deny him/her rights.

As many policyholders face this dilemma, is there a law that can be applied to compel employers to remit premiums in time?
— Julius K. K., Eldama Ravine

This problem of delayed remittance by employers of the premiums deducted from their employee’s salaries exists in our industry. For civil servants who have life insurance particularly, it has become acute with devolution.

As you rightly point out, many policyholders get affected when insurers intimate possible lapse of cover because they have not received premiums in due time according to the terms of the policy.

I can understand the policyholders’ dilemma.

You see, there are two contracts in this circumstance: the policy itself and the check-off system. The latter facilitates, firstly, the deduction of premium from an employee/policyholder’s salary by the employer and, secondly, provides for the employer to remit the deductions to the respective insurance company.

In essence, the check-off system itself comprises two further contracts: one involving the employee/policyholders signing the salary deduction authorisation, and the second one between the insurance company and the employer for effecting the requisite deduction and remitting the money to the insurer.

LIFE INSURANCE

In the circumstances, the employee/policyholder has fulfilled his/her obligations under the contracts. But under the current situation, it is the employer who is failing to keep their side of the bargain.

Although it is true the employer and insurer have an agreement for co-operation, this is engendered by goodwill with employers facilitating check-off to enhance their employee’s social welfare.

A caring employer will encourage employees to the prudent habit of regular saving and protecting their families such as through life insurance.

Indeed, this is the reason why most employers have facilitated check-offs for life insurance premiums. The agreements with insurers are more for co-operation than confrontation. So, the thought that such agreements should end up in court is rather impalatable.

Arising problems can be resolved through follow-up and dialogue.
This is what is exactly happening. Both through the Association of Kenya Insurers and individual insurers directly engaging their check-off partners, discussions are in progress to resolve the matter.

In particular, concerning policyholders in civil service, the problem has been exacerbated by the on-going devolution where many payrolls are being decentralized.

It is such changes that have disrupted the system, not the employers deliberately failing to fulfill their obligations concerning remittance of premiums deducted to the respective insurers.

The prevailing situation also impacts life insurance operations adversely, of course.

The premium revenue stream has been disrupted for many life offices. In turn, this affects the investment activity.

Insurers do not cherish disputes with their policyholders in these circumstances and that’s why they are working towards resolving the problem.

But they have to alert affected policyholders so that the latter can, from their end, promote their employer to resolving the remittance issue expeditiously.