Comment on new Insurance Regulatory Authority (IRA) Guidelines
Regulation of our industry in Kenya, is governed by the Insurance Regulatory Authority (IRA) and they have recently produced some ‘Guidance Notes / Guidelines’ addressed to the industry. These notes seem to have been ‘pounced on’ by the media and, in our view, incorrectly reported. As such, many Policyholders in Kenya are under the impression that they can buy insurance, but not pay for it or stop paying their premiums and expect cover to continue. In our view, this is misleading.
The idea of the industry offering support to Policyholders is an honourable one and we welcome the ideas and considerations, but these things need to be clarified and, ultimately, it is down to the Insurers if they feel they can accommodate these guidelines. Whilst we believe some of the guidelines will work for some insurance policies, it may not work for others.
In this article we look at some of these issues.
Premiums by instalments is an excellent idea, something JWS has been offering for the last 5 years. Hopefully, more Insurers will come forward and offer this facility. It would not be prudent, in our opinion to offer ‘deferrals’ or ‘premium holidays.’ The concern here is that if one suspends requests for payments, they accumulate, and the person or company will be left with a potential bad debt. Also, there is nothing to stop a Policyholder from getting cover, not paying and then after the final demand, they go and get cover elsewhere.
When does one provide the ‘grace period’? At inception or renewal or mid-way through the period of insurance. Like the first point above, failed businesses will leave bad debts and unscrupulous Policyholders may abuse the offering.
This is a tricky one for all local Insurers, who inevitably will have international reinsurance. The largest insurance provider in the World, Lloyds of London, has already started to impose exclusions to their reinsurance arrangements relating to Covid-19, so local Insurers will need to pass these on to local Policyholders. If not, the local Insurers will be exposed and that is something they will resist. There is therefore likely to be a lot of requests to the Regulator to ‘waive’ these specific guidelines.
All in all, we are pleased the IRA is trying to help the industry and those buying insurance, but please do not assume this announcement is the final word. We strongly recommend you check your policy very carefully, and ask your insurance adviser to explain, in writing, the implications of any non-payment of suspension of payment of premiums. It is a potentially dangerous practise.