Insurance brokers blame banks for loss of business
NAIROBI, KENYA: Brokers have accused banks of abusing a directive by the Government allowing them to offer insurance services to their clients.
According to the Association of Insurance Brokers of Kenya (AIBK), the National Treasury in 2011 introduced new rules that allowed banks to offer insurance services – also known as bancassurance – as a way of increasing insurance penetration in the country.
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Insurance penetration has been stagnant at three per cent for the past three years, according to data from the Insurance Regulatory Authority (IRA).
The model adopted by banks was aimed at offering insurance products or insurance benefits to the bank’s customers. The rules, according to AIBK, allowed banks to offer the services only to their corporate clients and not individual clients.
However, AIBK claims that the 26 bancassurance agents licensed by IRA have ignored the initial directive by the Treasury – the right to offer services only to corporates – and have started encroaching on the turf of brokers, luring individual clients to procure insurance policies through them.
“Treasury limited banks to only offering insurance services to their corporate clients so as to protect brokers from unfair competition from the established lenders,” AIBK Vice-Chairman Nelson Omollo said.
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“But they have now changed all that. They are forcing individual clients who have accounts with them to also procure insurance services through them. This has largely eaten into our market share and unless Treasury intervenes, we will be finished.”
The brokers have also accused the Government of bypassing them when sourcing for insurance services.
The brokers claimed that as of January 2018, they have lost more than 50 per cent of their market share as a result of Government agencies, especially parastatals, preferring to deal with insurancecompanies directly.
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“We are bewildered by this new development. Parastatals, which particularly need insurance services as they seek cover for their various properties and employees, used to come to us for services. Now they have chosen to contact the underwriters directly,” Mr Omollo said.
“When the State comes to us, we look for the best underwriter with the least amount of premium to insure whatever it wants insured. Through that service, it benefits without incurring any expense. So we wonder why they are bypassing us now.”