Insurance brokers could in future be penalized from receiving premiums from clients on behalf of insurance companies, a move that is seen in helping reduce fraud and customer dissatisfaction.
The proposed changes to the Insurance Act will see a broker or agent fined sh1 million if they receive the premiums. But in reverse, companies will be compelled to pay commissions to them on time after they receive the premiums or risk hefty penalties.
Dubbed the Insurance Act (Amendments) 2018 fronted by the Government is at the Committee Stage in the National Assembly.
“No insurer shall assume a risk in Kenya in respect of insurance business unless and until the premium payable thereon is received by the insurer”, the proposed law reads in part.
Its common practice for brokers also called intermediaries to receive premiums on behalf of insurers, a move that has raised controversies with cases of delayed settlements meaning that clients are inconvenienced. This has meant that clients have been unable to access cover on time, a reason contributing to low penetration of insurance in the country.
It further reads that “a broker or agent, also called intermediaries, shall not receive any premiums on behalf of an insurer. Any intermediary who contravenes this section shall be liable to a penalty of sh1 million on each contravention, payable to the Policy Holders Compensation Fund”.
On the payment of commissions to the intermediaries, companies will have to settle them within 30 days upon receipt of premiums. An insurer to contravenes this section is liable to a penalty of sh5 million.