Kenya, Uganda lock out in­sur­ance bro­kers

They will not be al­lowed to col­lect pre­mi­ums from pol­icy hold­ers


In­sur­ance bro­kers and agents in Uganda and Kenya are fac­ing an un­cer­tain fu­ture, in the wake of law amend­ments to bar them from han­dling pre­mi­ums.

Some rogue in­dus­try in­ter­me­di­aries use pre­mi­ums to con­duct other busi­nesses, lead­ing to late re­mit­tances to in­sur­ance com­pa­nies — lead­ing some un­der­writ­ers re­fus­ing to pay claims.

Now the two coun­tries have moved to en­sure di­rect pay­ments of pre­mi­ums to the in­sur­ers. This is ex­pected to make the go­ing tough for bro­kers and agents, com­ing at a time when their earn­ings, par­tic­u­larly in Kenya, are the de­cline due to de­pressed growth of the in­sur­ance mar­ket and ris­ing cases of pol­icy sur­ren­ders as a re­sult of hard eco­nomic times.

In Uganda, the gov­ern­ment has amended the In­sur­ance Act, for­bid­ding in­sur­ance bro­kers and agents from ac­cept­ing cheques or other payable or­ders from pol­icy hold­ers or prospec­tive pol­icy hold­ers.

The law, which takes ef­fect on Jan­uary 1, is ex­pected to have a di­rect im­pact on the op­er­a­tions of bro­kers, whose in­come com­mis­sions in­creased by 20.8 per cent in 2017 to $10.7 mil­lion, up from $8.8 mil­lion in 2016, ac­cord­ing to data from the In­sur­ance Reg­u­la­tory Au­thor­ity of Uganda (IRAU).

In Kenya, the Na­tional Trea­sury is push­ing for an amend­ment of the In­sur­ance Act to make it a crim­i­nal of­fence for bro­kers and agents to han­dle pre­mi­ums. The In­sur­ance Amend­ment Bill is be­ing de­bated in the Na­tional Assem­bly.

The dras­tic de­ci­sion by Ugan- da and Kenya comes at a time when the re­gion is try­ing to har­monise the in­sur­ance in­dus­try with the draft­ing of the East African Com­mu­nity In­sur­ance Act, 2018, which seeks to pro­vide an in­te­grated, sound le­gal and reg­u­la­tory regime that con­forms to best in­ter­na­tional prac­tices.

The push to block bro­kers and agents from han­dling pre­mi­ums has caused anx­i­ety among in­ter­me­di­aries, who face loss of busi­ness

“These new laws will deprive bro­kers of a huge chunk of busi­ness and many bro­ker­age firms will be forced to lay off em­ploy­ees,” said Nel­son Omolo, chair­man of the As­so­ci­a­tion of In­sur­ance Bro­kers of Kenya (AIBK).

In Kenya, data from the In­sur­ance Reg­u­la­tory Au­thor­ity shows that in 2017, 39.3 per cent of the to­tal in­dus­try premium was sourced through in­sur­ance agents; 33.5 per cent through in­sur­ance bro­kers; and 27.2 per cent was re­ceived di­rectly by in­sur­ance com­pa­nies. This means that bro­kers and agents han­dle about 72 per cent of the pre­mi­ums.

Go­ing by the fact that, in 2017, the gross writ­ten in­sur­ance pre­mi­ums stood at $2 bil­lion, mean­ing a stag­ger­ing $1.4 bil­lion passed through the hands of bro­kers and agents.

In Uganda, a mar­ket with 35 in­sur­ance bro­kers, the gross writ­ten pre­mi­ums in 2017 stood at $194.3 mil­lion, a 14 per cent in­crease from $169.4 mil­lion in 2016. Un­der the new law, Uganda has made it clear that no in­sur­ance cover will be pro­vided on credit and that all in­sured clients, both cor­po­rates and in­di­vid­u­als, must pay their pre­mi­ums up­front and in full to the un­der­writer be­fore the ef­fec­tive date of the pol­icy.

“All pre­mi­ums shall be paid di­rectly to the in­sur­ance com­pa­nies or health mem­ber­ship or­gan­i­sa­tion and not to an in­sur­ance bro­ker or in­sur­ance agent as the case has been,” said Al­haj Kad­dun­abbi Ibrahim Lubega, IRAU chief ex­ec­u­tive.

In Kenya, sec­tions of the pro­posed law stip­u­late that “an in­ter­me­di­ary shall not re­ceive any pre­mi­ums on be­half of an in­surer” and that an in­ter­me­di­ary who con­tra­venes the law will be li­able to a penalty of $10,000 on each con­tra­ven­tion, payable to the Pol­icy Hold­ers Com­pen­sa­tion Fund.

“We are op­posed to these plans of crim­i­nal­is­ing the as­pect of bro­kers han­dling pre­mi­ums be­cause in­ter­me­di­aries are im­por­tant in the in­sur­ance value chain,” said Mr Omolo.

He added that AIBK has made a sub­mis­sion to par­lia­ment to make changes to the Bill to al­low bro­kers to re­ceive pre­mi­ums, but re­mit to the in­surer all the pre­mi­ums pay­ments within a cer­tain pe­riod.

These new laws will deprive bro­kers a huge chunk of busi­ness and many bro­ker­age firms will be forced to lay off em­ploy­ees.” Nel­son Omolo, As­so­ci­a­tion of In­sur­ance Bro­kers of Kenya

Pic: File

Changes in the law seek to bar bro­kers and agents from han­dling in­sur­ance pre­mi­ums.

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