Why insurance take up is still low
Lewis Njoka @LewisNjoka
Indiscipline among insurance agents and brokers could be one of the major impediments to greater insurance penetration in the country despite the sector’s high growth potential.
Quarterly reports by the Insurance Regulatory Authority (IRA) show that agencies and brokers top the list of insurance fraud cases reported despite the fact that they account for most of the businesses insurance companies receive.
In Quarter 4, 2019, theft and complaints against brokers and agents accounted for 14 of the 30 cases IRA recorded that quarter.
This was a deterioration compared to quarter 3 where theft and complaints against brokers and agents accounted for 6 out of 31 fraud cases recorded.
In total, the insurance regulator directly attributed 34 fraud cases to agents and brokers in 2019 excluding other cases where they could have been involved indirectly.
As of May 5, 2020, Kenya had 9,937 agents according to the insurance regulator.
This has seen industry stakeholders call for closer scrutiny of the agents, saying they have a lot of influence on what happens in the industry.
“Much of what does or does not happen in the industry, therefore, depends on them, and yet insufficient attention is paid to their practices,” Occidental Insurance chairman, Mike Eldon, wrote in a local daily referring to agents and brokers.
He said the industry was full of indiscipline with serious premium undercutting and fraud leading to compromised growth and profitability.
Association of Kenya Professional Insurance Agents CEO, Clifford Ochieng, however, says fraud involving agents is only possible in collusion with underwriters as agents no longer handle cash.
He said some underwriters still choose to transact with the undisciplined agents even after IRA flags them for flouting set standards.
“Now agents don’t handle cash. I don’t know why the underwriters are now coming to blame agents.
These are internal cartels whereby underwriters get into agreement with somebody they know has bad history in the industry,” said Ochieng.
Changes to the Insurance Act made via the Insurance (Amendment) Bill 2018, completely bars underwriting agents and brokers from collecting premiums from policyholders.
He said the association, which has 1,600 members, was in the process of de-listing and blacklisting its member agents found to have engaged in fraud.
Association of Kenya Insurers Chief executive officer Tom Gichuhi, said there was very little insurance companies could do to curb indiscipline among brokers and agents as they were not members of the association.
He called on the Insurance Regulatory Authority and the trade associations that deal with the agents and brokers to develop a mechanism to curb the vice.
“For sure insurance companies should have mechanisms of disciplining rogue insurance agents,” said Gichuhi.
“But that only happens where the agent is a tied agent who only serves one company. But for independent agents who sell for anybody and everybody, it would be very difficult for any one insurance company to proclaim to be the one to discipline the agent,” he added.