Some 38 insurance brokerage firms have been delisted for non-compliance with the law, including failure to remit premiums on time.
Data by the Insurance Regulatory Authority (IRA) shows that only 184 brokers have been registered in 2022, against 222 last year.
Mr Kalai Musee, a senior manager in charge of supervision, licensing and enforcement at IRA attributed the drop in the number of registered brokers to failure to remit collected premiums on time.
“It has taken too long to license some of the brokers. Some brokers are yet to give us the evidence (premiums remitted to insurance firms). It doesn’t mean that there are no [new] brokers. But, because of that process, last year we de-gazetted 13 brokers because they were not able to pay their premiums,” Mr Musee said.
Prompt payment
In 2019, IRA amended Section 156 of the Insurance (Amendment) Act, to enhance prompt payment of premiums to underwriters to eliminate the perennial problem of outstanding premiums by the intermediaries.
The previous law allowed brokers to hold policyholders’ premiums for about 60-days before remitting them to insurance underwriters.
However, brokers challenged the legality of the law change at the High Court, which eventually was declared unconstitutional. The case is now at the Supreme Court.
“When the law did not go through, we decided to be strict on the licensing of brokers. So, we take it as malpractice. If you are holding premiums and if there is evidence that you have not remitted premiums, we will not license you,” Mr Musee added.
However, brokers found a loophole to bypass the requirement by arm-twisting insurance companies indicating that they won’t give them business unless they issue a certificate showing compliance with the remittance requirements.
Most insurance companies in Kenya rely on the agents to access customers, making the relationship hard to sever despite the shortcomings.
“Insurance companies were writing those letters to us saying they (brokers) have paid. This time we said we want(ed) hard evidence of payment, whether bank statements, bank transfers or cheque.”
IRA data also shows that the number of insurance agents dropped from 12,030 to 11,932 in the period BY DAILY NATION