A World-Class Insurance IndustryAn Achievable Dream In Kenya

Abstract

Insurance industry management in Kenya has become a problem for years. With the collapse of many companies, most policy holders arc losing confidence in insurance day by day. Kenyans have stopped considering insurance as a kind of cover. The whole idea of having insurance cover to compensate the policy holder when the risk occurs has been distrusted by many.1 At the time when the policy holder is faced with the risk, insurance companies are not willing to pay as promised. Moreover most of them have gone underground, others are doing poorly because of management problems, others delay in payments, while others in fact, are unable to pay compensations at all. This raises questions as to whether consumer protection laws in Kenya have been put in force at all. The loss of confidence in insurance has in turn caused poor performance in the industry and has therefore negatively affected the entire economy in Kenya. Since insurance contracts are promissory in nature that at the time of the sale the insurer undertakes to make a payment to, or on behalf of the policyholder upon the occurrence of a specified event,2 it is expected of them to stay in business until that occurrence. The exit of health management organizations and the collapse of some insurance companies have therefore resulted in a negative impact on the industry as a whole as they are seen as short term organizations that do not live up to their promise. This problem is not just confined in Kenya but has spread to the rest of Africa as well; an example is Donewell Insurance, one of the leading insurance companies in Ghana, which is at the moment battling a critical financial setback which has even led to the non-payment of staff members and economic loss to policyholders. The insurance industry is also faced with problems of fraud: exaggerated claims, fake documents, misconduct of sales agents: these are all serious issues requiring solutions. 1 Geoffrey Njenga .Comparative Study Of Insurance Industry Between Kenya And Singapore 1963-2003, Institute Of Diplomacy And International Relations .University Of Nairobi.2005 2Colinvaux law of insurance. 1 Insurance in Africa generally suffers serious stagnation and is in urgent need of resuscitation and deliberate care so as to contribute to economic well being of the African j people/ ‘Modernization of the management of African insurance’ is seen as the only hope for the stagnated industry. By this, it is meant that, a whole lot of things including wholesome technical operations, development of new products increased company and market capacities ,sound financial and commercial management business recapitalization of companies and use of technological tool.4 * In 1998,AKI contracted PWC (Pricewaterhouse coopers) to analyze the challenges facing the Kenyan insurance industry. The study identified a full set of problems facing the industry ranging from low penetration ratio, unprofessional behaviors, inadequate regulatory framework and low adoption of technology as a management tool as key issues.' The government has made efforts to come up with regulatory organizations to supervise and manage insurance companies but the question is still being asked: have these regulatory organizations achieved what they were intended for? Today people are talking about bancassurance6 and micro insurance7 8 as ways of improving the performance of this very important industry in Kenya. We are still wondering whether this will work. Bancassurance refers to the integrated business of offering core banking services and products together with insurance. Bancassurance has been embraced in countries such as France, Japan and the United Kingdom with tremendous success. The Insurance Regulatory Authority (IRA) says bancassurance is the way forward in raising insurance penetration in Kenya.* bancassurance has various benefits to the bank and also to the insurers.9 Micro insurance on the other hand targets the low income earners. It protects them against specific perils in exchange of regular premium payments proportionate to the likelihood and cost of the risk involved. 10 ’ Bakary Kamara Challenges Facing the African Insurance Industry in the Next Millenium’ unpublished paper. , Bakary Kamara ‘Challenges Facing The African Insurance Industry In The Next Millenium’ unpublished paper http//www.pwc.co.ke /insurance-accessed on 15th March 2010. The Kenya insurer, no. 1 vol.7, July 2009 defines ‘bancassurance’ as the integration of offering banking services as well as insurance services. 'This is offering of insurance cover to the low income in the society such as ‘Juakali’ 8 The Kenya insurer. No. 1 vol.7, July 2009. J 9 See the Kenya insurer.no. 1 vl.7 July 2009 at pg 25. 10 The Kenya insurer, no. l vol.7 at pg 4.