In a shocking move, the Insurance Regulatory Authority (IRA) of Kenya has dealt a significant blow to 20 insurance companies, imposing a collective fine of a staggering Sh94.85 million. This record-breaking penalty sheds light on various breaches within the industry, raising concerns about the stability and reliability of insurers in a sector entrusted with safeguarding customers against potential losses.
Data from the IRA indicates that the year 2022 witnessed the third consecutive surge in fines, underscoring a growing trend of non-compliance among insurance entities. In the preceding financial year, the IRA penalized 10 insurers with Sh56.9 million—an alarming spike from Sh17.6 million in 2020 and Sh2.7 million in 2019.
The infractions leading to these fines encompass a spectrum of issues, including the failure to fulfill claims, delayed payment of annual licensing fees, and tardy submission of financial performance records. These lapses not only jeopardize the financial stability of insurers but also raise questions about the effectiveness of regulatory oversight.
Trident Insurance Company Limited bears the brunt of the penalties, facing a hefty fine of Sh48.86 million for eight breaches. Invesco Assurance Company follows closely with a fine of Sh31.26 million, grappling with a looming liquidation order triggered by defaults in claims payments.
One glaring violation involves the timely processing of claims, a fundamental obligation stipulated by law. Insurers are required to admit or deny liability, determine the claim amount, identify the claimant, and disburse payment within 90 days. Failure to adhere to this timeline incurs penalties, including a five percent charge on the outstanding amount, with an optional 30-day extension.
Xplico Insurance Company Limited, currently under statutory management, faces a fine of Sh5.5 million. Monarch Insurance Company Limited and Intra Africa Assurance Company Limited round out the top five offenders, receiving fines of Sh2.43 million and Sh1.3 million, respectively. Remarkably, all but Intra Africa faced fines from the IRA in the previous year, revealing a concerning pattern of non-compliance.
The Consumers Federation of Kenya (Cofek) sounded the alarm in September, asserting that consumers faced potential losses exceeding Sh100 billion due to the weak capital positions of at least 20 insurers. Cofek went on to sue the regulator, emphasizing a rising challenge in regulation and leadership at the IRA.
In response, the IRA’s fines target a range of issues, from late submission of claims returns to delayed payment of annual licensing fees. This crackdown signals a heightened focus on enforcing regulatory standards, aiming to safeguard the interests of millions of customers in a climate where complaints about delayed or unpaid claims continue to mount.
Complaints against insurers have surged for the third consecutive year, reaching 1,878 and surpassing the previous two years. Delayed settlement of claims constitutes a significant portion of these grievances, accounting for 63.3 percent.
Notably, half of the fined insurers also feature on the list of companies with at least 30 new complaints, forming the top 20 insurers against which grievances were filed. This correlation raises pertinent questions about the direct impact of IRA penalties on the quality of service provided by insurers.
As the regulatory landscape tightens its grip, the Kenyan insurance sector faces a pivotal moment, compelling insurers to reevaluate their practices and prioritize compliance to restore confidence among consumers. The fines serve as a stark reminder that adherence to regulations is not just a legal requirement but a crucial element in upholding the integrity of the insurance industry.