This week, Insurance Regulatory Authority chief executive officer Godfrey Kiptum responds to your questions.
1 Many surveys have revealed that insurance uptake in the country is still low. What are some of the reasons that contribute to this? Komen Moris, Eldoret.
There are a number of reasons: First, there is lack of public awareness on insurance matters. The authority is engaged in aggressive campaigns to educate the public on the role and importance of insurance. These activities include training and certifying at least 100 agents in each of the 47 counties, conducting consumer education outreach activities in 40 counties, targeting groups such as boda-boda riders, farmers, boat riders, teachers, the business community, cooperatives, youth, religious organisations, and chiefs. We have also conducted insurance week in collaboration with other organisations, targeting the public and open days for lawyers, universities and schools.
Second, the nature of insurance contracts is also a contributor. For a long-time insurance companies have used policy documents with fine print and technical jargon that have not been easy to understand.
In 2012, the authority embarked on a project to simplify policy wording that was adopted by all insurance companies. The authority has simplified policy wording for 14 classes of general insurance business, including motor vehicle.
Third is the negative perception of insurance by the public. This has been largely caused by poor customer service by some insurance companies.
The authority has put in place several measures aimed at improving the image of the industry. These include requiring companies to have a customer-care desk to address policyholders’ grievances, and implementing a transparency and consent framework that requires insurers to treat their customers fairly at all stages of the business relationship.
The authority has put in place a consumer protection unit that receives and resolves complaints filed against members of the insurance industry.
Fourth is the problem of insurance products that do not address the needs of most people. The authority will address this through the proposed micro-insurance regulations that have been gazetted. These will give access to most of the population and covers will be commensurate with different categories of people.
2 Why are some insurance companies that went under not deregistered? What goes on at these shells of insurance companies? Githuku Mungai, Nairobi
All companies that went under have been deregistered. However, the process of dissolving companies is long. The court has appointed interim liquidators for Standard Assurance Ltd and Concord Insurance Company. Liquidation requires the Commissioner of Insurance to make an application to the High Court. The other two companies — United Insurance Company and Blue Shield Insurance Company — are under statutory management. They are awaiting a court decision. Liquidating insurance companies is subject to the 2015 Insolvency Act, which is outside the ambit of the authority.
3 There has been an outcry that some rogue insurance companies take premiums and swindle clients’ money as the regulator looks the other way, and that the regulator has failed to rein in such firms. What are you doing to protect the public? Raphael Obonyo, Nairobi
One of the objects of the authority is to protect policyholders and beneficiaries of insurance contracts. The authority is both a prudential and market conduct regulator.
The regulator ensures that insurers are financially sound and stable to meet their liabilities as they fall due. The authority also ensures that companies treat their customers fairly and anybody who feels aggrieved can complain. The authority has implemented risk-based supervision, which is a tool for assessing risks that an insurance company is exposed to and measures put in place to mitigate the risks.
4 A number of insurance companies have gone under over the past three decades, right under the nose of IRA, leaving many Kenyans languishing in abject poverty. What are you doing to ensure that directors and managers of collapsing firms found culpable of abuse of office and misappropriation of public funds take responsibility? Raphael Obonyo, Nairobi
The authority has amended the Insurance Act to give it power to hold directors of insurance firms jointly and severally liable where assets of an insurer that collapses have been misappropriated. Section 175 makes errant acts committed by persons with authority in an insurance company, including directors, a criminal offence.
5 Some insurance companies have introduced sub-limits and restrictions that make customers unable to access health services. Whenever employees seek medical attention, the companies argue that the procedure recommended by the doctor is not necessary and therefore they cannot authorise. How does IRA deal with errant firms that flout members’ right to access medical insurance services? James Mark Ngari, Kerugoya
An insurance contract is guided by terms and conditions as stipulated in the policy document. We urge the public, and specifically policyholders, to ensure that they get a policy document from the insurance company as this exemplifies the insurance contract between them.
They should also read the terms and conditions of the policy to ensure that it captures what has been agreed before signing the document. There is a grace period, indicated in the policy document, where a policyholder can cancel the contract if they are not satisfied with the terms and conditions.
In the event of a dispute between a policyholder and an insurance company, the authority is guided by the terms and conditions of the policy document.
Hence policyholders should understand what is in the document to ensure that their interests are not jeopardised in any way.
A policyholder can negotiate with an insurer on the cover they need if the standard cover is not adequate. The limits and sub-limits can be agreed upon between the parties.
6 A majority of banks have diversified their businesses to include a wide range of insurance products and services so as to remain competitive and relevant, even though insurance is not their core business. As a regulator, what measures have you put in place to ensure that they fully adhere to insurance regulations? Dan Murugu, Nakuru
Let me clarify that banks are not offering insurance products and services.
Rather, they have partnered with insurance companies in an arrangement known as “bancassurance” to act as distribution channels for insurance products.
Banks have wide branch networks and hence insurers are able to reach clients across the country. Lenders are therefore registered as insurance agents under the Insurance Act.
7 With the advancement in technology over the last 20 years it can be said that insurance brokers are no longer relevant. However, I think that these people are still important to grow and expand insurance cover across the country. How does your authority plan to work with them to reach as many Kenyans as possible? Dan Murugu, Nakuru
Advancement in technology will not replace brokers in the insurance value chain. Technology offers a platform for consumers to conduct research before buying insurance cover, such as comparing price as well as purchasing simple insurance products.
Insurance intermediaries (brokers and agents) will remain relevant in the distribution of products especially complex commercial, life and health risks. They also play a critical role where personal interaction and expert advice are required.
Most insurance brokers are changing their business models from the traditional role of acquiring and placing insurance services and products to providing risk management and advisory services.
The challenge for insurers and intermediaries in this era of technology is to customise their business models in line with the varying needs and preferences of customers.
8 Sir, you sit on the board of the Retirement Benefits Authority (RBA) while your counterpart at RBA sits on the IRA board. Could you help us understand why this arrangement is necessary? Don’t you think the arrangement can create conflict of interest where, say, RBA wants to discipline one of its members who on the other side has met all IRA requirements? Faustine Bundotich, Nairobi
The two agencies regulate financial services and this arrangement facilitates collaboration and better supervision of the two sectors. Most of the players in the financial services sector provide services across the four sectors: banking, securities, insurance and pensions.
9 Why is IRA unable to solve public complaints? I filed two cases — one on accident and injury against Xplico Insurance. The second was about my car cover with Monarch Insurance, which replaced my proposal with an agency one without my knowledge or authority. I have not received any response from IRA, which makes me think that either the insurance companies are powerful and therefore untouchable or IRA just doesn’t care. George Maina Wahome, Nyahururu
The authority listens and responds to all claims and injury claims and subjected to court processes. The authority responded to Mr George Maina Wahome on August 27, 2018, and we have not heard from him since.
10 The Treasury Cabinet secretary in January decreed that NHIF comply with Section 19 of the Insurance Act and IRA’s regulatory requirements if it is to continue offering commercial insurance services. To what extent has the fund complied with this? What will be the significance to clients if NHIF is placed under the ambit of IRA in so far as regulation is concerned? Samuel B. Njiru, Nyayo Embakasi
The Insurance Act has been amended to bring NHIF under supervision of IRA. The purpose of regulation is to ensure protection of policyholders, hence their regulation will ensure that the interests of policyholders will be taken care of.
11 Is there a limit as to how many insurers a person can engage with for the same issue? Shem Onderi, Kisii
Clients are free to engage with any licensed insurer for any services that they need. However, it will not be to the benefit of the policyholder but to indemnify.
The concept of indemnity does not, however, apply for life insurance. When an insured insures their lives with several insurers, they can be paid by all of them whenever the insured event materialises.