Regulator shocks 20 Kenyan insurers with record fines over breaches

The insurance regulator has fined 20 insurers a record Sh94.85 million over various breaches, including failure to pay claims, shining a spotlight on the sector that collects billions of shillings from customers with the promise of compensation in case of a loss.

The Insurance Regulatory Authority (IRA) data shows the year ended 2022 marked the third straight year of rising fines as well as the number of insurers getting penalised.

The regulator had in the preceding financial year penalised 10 insurers Sh56.9 million, which was an increase from Sh17.6 million in 2020 and Sh2.7 million in 2019.

Read: Regulator punishes 10 insurance firms, triples industry fines

The breaches included failing to pay claims, late payment of annual licensing fee and late submission of financial performance records, leaving the regulator in the dark over their stability and safety of covers.

The growth in the number of insurance companies breaching industry regulations puts focus on the stability of many of the firms and presents a worry to millions of customers in an environment where complaints over delayed or unpaid claims have been mounting.

Trident Insurance Company Limited was hit with the heaviest fine of Sh48.86 million over eight breaches followed by Invesco Assurance Company (Sh31.26 million), which is currently battling a liquidation order after defaulting on claims payments.

According to the law, an insurer should admit or deny liability, determine the amount, identify the claimant and pay within 90 days. A company can request a 30-day extension but attract a five percent penalty on the unpaid amount.

Xplico Insurance Company Limited, which the IRA placed under statutory management early this month, was fined Sh5.5 million while Monarch Insurance Company Limited and Intra Africa Assurance Company Limited were hit with Sh2.43 million and Sh1.3 million fines respectively, closing the top five casualty list.

The five, except Intra Africa, had the previous year also been fined by the IRA, with Invesco having been hit with a Sh24.94 million fine to stay in the IRA’s black book. Xplico was in 2021 fined Sh18.9 million while Trident and Monarch paid fines of Sh900,000 and Sh32,500.

The Consumers Federation of Kenya (Cofek) in September wrote to the IRA claiming that consumers risked losing over Sh100 billion in the hands of at least 20 insurers it says continue collecting premiums yet have no capacity to pay claims due to their weak capital position. It then sued the regulator.

“From our investigations, the number of non-compliant licensees masquerading as bona fide insurers has risen. This reality points to a serious challenge in regulation as well as leadership at the Authority,” said Stephen Mutoro, Cofek secretary general, in a letter to the IRA.

Trident was late in the submission of claims return that shows premiums received and claims paid out as provided in law. It also failed to pay claims and was also late in submitting the premium levy return.

The IRA fined Xplico for late submission of claims return and premium levy return, late filing of quarterly returns and paying annual licensing fee after the deadline.

African Merchant Assurance Company (Amaco) was fined Sh1.02 million while Kuscco Mutual Assurance, which also failed to submit its quarterly unaudited financial statements as required by law, was fined Sh720,000.

New entrant Equity Life and Old Mutual Life Assurance Kenya were each fined Sh680,000 for late payment of annual licensing fee while Kenya Orient Insurance was fined a similar amount for late submission of premium levy return.

Cannon General was hit with a Sh500,000 fine. Gemina Life, Kenindia Assurance Company and Corporate Insurance Company were fined Sh450,000, Sh370,000 and Sh300,000 respectively. Geminia Insurance (General) was hit with a Sh210,000 fine.

Other insurers fined by the IRA were Kenya Orient (Sh200,000), Madison Life (Sh200,000), Pacis Insurance (Sh157,200) and Directline (Sh40,000).

Complaints against insurers rose for the third straight year to 1,878, surpassing the 1,686 the previous year and 1,637 in 2020, with delayed settlement of claims taking up 63.3 percent.

Read: Invesco defaults on Sh53m claims amid liquidity crisis

Half of the fined insurers made it to the list of insurers that registered at least 30 new complaints in the year under review and also formed the top 20 insurers against which insurers filed grievances against, hinting at a direct correlation between IRA penalties and quality of service.

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