A new law crafted by Insurance Regulatory Authority(IRA) seeks to cap size of business banks give to one underwriter to allow policy holders have a wide choice of insurance service providers.
The regulator said under lack of regulations has made it hard to control the market, making it difficult for large number of insurance agents and brokers trade comfortably in bancassurance.
IRA Commissioner of Insurance, Sammy Makove, at the inaugural bancassurance conference in Nairobi today said it was unfair for banks to give all its insurance business to a single underwriter and force consumers to undertake premiums from a particular provider.
It has emerged that banks are forcing customers to buy cover from specific underwriters, pushing brokers into massive losses, with claims banks are colluding with partner banks to introduce extra hidden charges with lack of disclosure on how customers can make claims.
“That is not proper, it is not fair treatment to customers. Consumers should be allowed to make their own choices,” said Makove.
A draft regulation he said will soon be available for discussion proposes introduction of a threshold that will see a certain percentage allowed for bank’s partner underwriter to open up the remaining percentage to other service providers.
The regulator has noted rising number of low cost insurance products are yet to reach the poor, despite their attractive pricing models, citing low value attached to them.
“The fact that the product is lowly priced does not mean it has value. That is why you see such products failing to sell six months after they were launched,” said Makove.
The low shelf life of these products he said sprouts from the design stage where developers overlook the value that should be attached to a policy.
The industry grew 20 percent to hit Sh 165 billion in premiums written last year, and recorded a four fold growth since 2007 when returns were Sh41 billion.
However penetration of insurance in the country has grown marginally by close to a percentage point to 3.4 percent from 2.6 percent over the last seven years.