What is the work of insurance associations in Kenya?

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Insurance associations typically are not-for-profit organisations and are meant to provide members with a range of services which includes support and training as well as lobbying on their behalf. 

Other services spelt out in their mandate include giving members information about the industry such as how changes to legislation will affect their business.

They are also supposed to provide members with useful resources like information and programs to help meet industry standards, run training and education programs, organise seminars, facilitate networking events, manage mentoring programs, connect members with other businesses in the industry, arrange public relations or advertising activities to promote the industry, organise advertising campaigns to educate or persuade the public about issues relevant to the industry and also lobby on behalf to influence government policy. 

These associations offer some information and services for free although one needs to become a member and pay a fee to access their full range of information, resources and services. By becoming a member of the peak body one can give his/her business credibility as membership proves to customers that you have met strict criteria and have certain qualifications and experience.

That is why we have strict criteria on who can become a member of our organisation in an industry inundated with fraudsters from all corners. 

It should be noted that membership to these organisations is voluntary and therefore one can find players in the industry not affiliated to any organisation, this especially happening to insurance agents.

This does not auger well for an industry beset with fraud and other malpractices amongst the players. These unaccountable elements have tarnished the name of the industry and have led to the low penetration of insurance. The regulator, the Insurance Regulatory Authority of Kenya (IRA) has kept mum about this state of affairs, making one wonder about the state of the industry in Kenya.

The minimum we expect the regulator to do is push for official recognition of the associations under the Insurance Act such that no one can operate without being a member of either of the respective associations. This will get rid of the many cons in the industry masquerading as insurance agents or brokers. 

The brokers through their association have generally gotten their act in order considering they are the oldest association in this country. They have over ninety per cent membership of all the brokers. They are also few in numbers and therefore easier to control. The same is with the Association of Kenya Insurers (AKI) which enjoys full membership of the players in the industry.  

Activities among the various associations can be rated at about sixty per cent and even lower among the insurance agents. The level of activity is directly related to the amount of finances available to carry them out and being non-profit organisations that means the bulk of their monies is gotten from membership fees.

Brokers and insurance companies have their members contributing faithfully which means that they can effectively lobby for their members’ welfare. Insurance agents not being good payers of membership fees means that sometimes they have to ride on the successes of the brokers since we have almost similar problems in the industry.  

Worth noting is that industry associations can become very powerful and set the tone of the sector. This may be perceived as a threat to the regulator.  The regulator cannot effectively dictate to the agents if an agent association had the financial muscle to set policy. A weak agents’ association is also seen as being good for insurance companies since they are not able to effectively fight the many illegalities done to them.  

We can experience this power of industry associations by looking at AKI which practically controls the industry. They have held the regulator by the vitals and have had him quaking at the corner in fear of what they can do to him. Most insurance companies have failed in their capitalization such that they cannot pay for claims but they continue operating and collecting premiums. The regulator is powerless to enforce closure of these companies despite the immense powers bestowed upon him by the Insurance Act. Practically all that happens in the insurance industry revolves around the insurance companies, and that is why insurance companies deny claims without fear of reprisal. Insurance companies continue to print insurance motor certificates illegally but nothing has been done about it despite my pointing this out. It only takes a good lawyer to argue this case in court and motor insurance in Kenya will be completely overhauled.  

A strong insurance agent and brokers’ organisation will effectively check the excesses of the insurance companies and make the confounded regulator act. That is what ails this sector that is so crucial to the success of any economy.

Washington Ndegea is the Chairman of Bima Intermediaries Association of Kenya (BIAK)

Opinions by contributors are views of respected thought leaders in the respective industries they operate in. The Exchange is a close partner with each of the various opinion contributors.

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