Kenyans paying billions for insurances covers that don’t exist


It has been established that businesses, individuals and households have spent more than Sh43 billion in premiums on non-existent insurance covers after agents failed to remit the payments to insurers, exposing the customers to heavy losses when they make compensation claims.

Court documents by The Insurance Regulatory Authority (IRA) have disclosed that insurance brokers collect billions of shillings from customers but fail to remit the money to insurance companies as required. This means that the risks covered, which are in excess of Sh500 billion, are not recognised under the “cash and carry” principle. The principle stipulates that if an insured party suffers loss before the premium is remitted to the insurer then the insured cannot be compensated.

As a result of agent’s failure to meet their statutory obligations, general insurers are owed Sh42 billion while companies offering life covers are owed Sh1 billion. Analysts say that premiums paid to general insurance companies represent between one and five percent of the value of the risks covered, meaning that customers expect to be protected from losses of much higher values.

The Sh43 billion is equivalent to 19.8 per cent of the Sh216.2 billion gross premiums that Kenya’s 37 insurance firms underwrote last year.

Unremitted premiums have piled up over the years from Sh26 billion in 2014 to Sh43 billion last year. Policies covering motor vehicles have the highest premiums of between four and five percent of the value of the vehicles. Other policies in the general insurance segment include engineering, domestic fire, industrial fire, medical and theft.


The insurance regulator has disclosed the pile of insurance premiums held by brokers in a court case where the agents are fighting a law that bars them from receiving customers’ payments on behalf of insurers. The Insurance Act was amended effective July this year, barring brokers from handling cash on behalf of insurers. However, the brokers received a temporary court injunction allowing them to continue receiving the premiums until the dispute is determined.

Defending the law change, the sector regulator says brokers were exposing customers to heavy losses besides weakening the financial stability of insurers by failing to remit the premiums collected.

“The intention of the amendments is to enhance liquidity of an insurer and promote payment of claims, while eliminating the perennial problem of outstanding premiums,” IRA chief executive Godfrey Kiptum says in a replying affidavit.

The regulator cites the example of Online Insurance Brokers Limited which collected premiums from one Eunice Ndathi but failed to remit the money to AIG Kenya Insurance Company Limited. The move resulted in the insurer refusing to pay the customer’s claim, which had been assessed at Sh14.7 million.

The underwriters have been writing off increasingly larger sums, with provisions for the bad debt standing at Sh3.5 billion last year alone.

“The writing off as bad debt has an impact on the insurer’s financial position and liquidity. Further, the insurers had to bear the burden of Sh10 billion on capital adequacy for credit risk,” Mr Kiptum says.

He argues that brokers should only earn commissions for their work and should have no further interest in premiums collected.

Underwriters with the biggest exposure are UAP Insurance which was owed Sh1.15 billion by agents as of last year, followed by East African Reinsurance Company (Sh1.13 billion) and Jubilee Insurance (Sh930.8 million). Others are CIC General Insurance (Sh803 million), APA Insurance (Sh720.7 million) and ICEA Lion General Insurance (Sh605.5 million).

Brokers listed as the biggest defaulters are Minet Kenya, which owes underwriters a total of Sh1.5 billion, followed by D&G (Sh441.5 million) and Zamara Risk & Insurance (Sh358.5 million).

The Association of Insurance Brokers Kenya (AIBK) — the agents’ lobby group — argues that the ban on cash handling, contained in the Insurance (Amendment) Act No. 11 of 2019 & Regulations, will drive its members out of business.

During the process of changing the law, brokers had last year lobbied Parliament for a compromise, pushing instead for a penalty to be introduced to address the issue of embezzlement of premiums. As a result, MPs approved a Bill that allowed brokers to receive premiums but forward the cash to insurers within 14 days. However, when the Bill went for presidential assent with the brokers’ recommendations, President Uhuru Kenyatta declined to sign it and sided with the National Treasury, which had sought to lock out the brokers.

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