Kenyans Paid Sh 35 Billion to Non-Existent Insurance in 2019

Kenyan citizens and businesses are found to have spent Ksh.35 billion on non-existent insurance covers in 2019 after brokers refused to remit premiums.

According to Business daily who first reported the news on Wednesday, the failure to remit the premiums means that if an insured party suffers loss before the premium is remitted to the insurer then, the insured cannot be compensated. As a result the customer suffers heavy losses when making compensation claims.

Insurance Regulatory Authority (IRA) CEO Mr. Godfrey Kiptum says that “the amount of outstanding premiums in the industry declined by 14.5% from Sh41.77 billion in 2018 to Sh35.73 billion in 2019. Out of all the outstanding premiums in 2019, general insurance business accounted for 83.7% while long term insurer’s proportion was 16.3%.”

IRA in its reports also disclosed that their threats to deny operating permits to insurance brokers has covered little to lowering unremitted premiums.

The risks worth Ksh.35 billion is equivalent to 15.9% of the total Ksh 227.5 billion gross premiums that 56 Kenyan Insurance firms underwrote last year.

IRA also adds that brokers control 41% of the business underwritten in Kenya and is impacting negatively on the insurance companies.

The Insurance Act which was amended in July 2019 states that insurance brokers are barred to handle cash on behalf of their insurers.

However, brokers received a temporary court injunction allowing them to receive premiums until the dispute is resolved.

IRA states this has resulted in not only making customers suffer losses but also weakening the financial stability of their Insurance companies by failing to remit premiums they have collected.

Long-term insurance underwriter with the biggest exposure is Pioneer Assurance which owed sh.1.5 billion while CIC Insurance which is general insurance underwrite had the biggest exposure which was owed Ksh.2.3 billion all caused by agents.

The Association of Insurance Brokers in Kenya (AIBK) states that the Insurance Act will result in bringing their members out of business. They compromised when they lobbied the Parliament to push for a penalty to address the issue of embezzlement of premiums. However, President Uhuru Kenyatta refused to sign the bill and sided with the treasury which decided to lock out the brokers.

Insurance Premium Financing which helps consumers pay their insurance in installments is also being accused by brokers that they owe millions to their customers.