Insurance brokers pocketed at least Ksh35.73 billion from unsuspecting Kenyans seeking to purchase or paying for insurance covers in 2019.
It emerges that the money was never submitted to insurance companies, or the buyers were sold non-existent insurance policies, according to Insurance Regulatory Authority’s (IRA) latest annual report.
This means that the affected Kenyans could not get compensation in case they encountered losses and sought compensation from the underwriters.
“The amount of outstanding premiums in the industry declined by 14.5 percent from Ksh41.77 billion in 2018 to Ksh35.73 billion in 2019. Out of the outstanding premiums in 2019, general insurance business accounted for 83.7 percent while long term insurers proportion was 16.3 percent,” noted IRA CEO Godfrey Kiptum.
Kenya has 56 insurance companies, which in 2019 underwrote premiums worth Ksh227.9 billion, meaning 15.6 percent of the premiums were not submitted to the underwriters.
In its report, the IRA now wants to deny permits to the brokers implicated in the scam, that has exposed thousands of Kenyans, especially those with motor vehicles to uncovered risks. Motor vehicle insurance premiums are the highestt at five percent.
In July 2019, the Insurance Act was amended to block brokers from handling cash for insurance companies, but the agents got a temporary court order suspending the amendment until a case they filed was heard and determined.
Of the unremitted premiums, CIC Insurance was owed Ksh2.3 billion by agents, while Kenya Reinsurance was owed Ksh1.95 billion. East African Reinsurance Company was owed Ksh1.86 billion while Pioneer Assurance was owed Ksh1.5 billion.
Read: Jubilee Insurance Sells Majority Stake Of Its Business To Allianz For Ksh10 Billion
Jubilee Insurance was owed Ksh726 million while CIC Life Assurance Company was owed Ksh661 million.
In last year’s amendments the Association of Insurance Brokers Kenya wanted Parliament not to ban them from handling cash. The MPs partially granted the plea, allowing the agents to legally hold the premiums for only 14 days.
However, when the bill was forwarded to the President to be signed into law, the President declined to sign the bill and recommended that the brokers be completely barred from handling cash.
IRA says that brokers control 41 percent of the total premiums in the insurance industry.
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