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Expert calls for review of insurance policy

NAIROBI, Kenya, May 28 – A section of insurance industry players now want the government to re-look at the health insurance model in use in the country.

Real Insurance Chief Executive Officer Joseph Kiuna said on Wednesday that a new structure is required to ensure that any firm that offers medical insurance is either an insurance company or has facilities that provide health services.

“We need a provider-based model where if you are going to provide medical insurance, you create a chain of facilities and outlets that provide accommodation, consultancy and laboratory (services) and all these can be verified,” he explained.

Currently, he said anyone can just set up a firm, collect premiums from the public but there is no mechanism to account for the funds. This is what caused the collapse of several Health Management Organisations (HMOs) in the country a few years ago.

He also said the country should also adopt rules where an insurance company’s financial strength is calculated based on the risk profile for that firm and not its asset base as is the case now.

“If you just write one class of business, it does not make sense to ask you to have the same capital requirements as an underwriter who insures 20 classes of insurances. We think that a regime where your solvency ratio are calculated based on the risk appetite for your company would be the most equitable way of working it out,” he added.

A ‘graduated capital requirement’ should also be put in place where if a company has a few risks on the books, then the capital base does not need to be high.
Currently, the capital requirements for general insurer are the same across all the 43 insurance firms.

Mr Kiuna underscored the importance of mergers for these underwriters saying the sector is too crowded and consolidation would improve efficiency in the industry.

Speaking during a media briefing, Mr Kiuna said these are some of the proposals that the sector wants to see considered in the review of the Insurance Act together with issues of fraud which has threatened to cripple the industry.

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He pointed out that the sector still operates under the Act which was formulated in 1984 thus the need to update this regulatory framework. However, Mr Kiuna was of the opinion that self regulation should be the way to go.

Membership bodies such as the Association of Kenya Insurers, Insurance Institute of Kenya and Association of Insurance Brokers should be given ‘teeth’ through legal recognition so that they can formulate self regulations which they can then enforce.

“Some of the governance and management issues that we have had as an industry and which have led to the downfall of some companies is because these associations are not empowered by law to discipline or deal with errant members who don’t conduct their business in a professional way,” he argued.

Another concern for them was the remuneration of brokers and agents which he said should also be liberalised to allow insurance companies determine how much to pay their intermediaries.

The commission rates that are currently paid to brokers and agents are included in the Act but now the players want to have a freehand in determining what these agents are paid depending on the value they are adding to the business.
At the same time, the CEO appealed to the government to execute the ‘Cash and Carry Concept’ which requires the insured population to pay their premiums upfront.

This concept was introduced in 2007 but has not been implemented since.

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