The Internal Revenue Authority (IRA) is making moves to ensure transparency and effective service delivery within the insurance sector. According to the Authority, the initiative will enable Kenyans to better understand their cover policies as well as enforce a more open system of information within the industry.
“We are preparing these four sets of guidelines to respond to the various challenges that have faced the insurance industry which have impacted negatively resulting to low penetration of insurance in Kenya,” said IRA CEO and Commissioner, Sammy Makove.
Speaking during a workshop at the Safari Park Hotel on Tuesday morning, Makove said that the current level of insurance penetration in the country was an indicator that there is a disparity between the industry players and the public.
He said that the IRA had been receiving complaints from consumers about slow response time and a lack of transparency in claims payments, irrelevant insurance products and professionalism.
In 2011, the Kenya Insurance Report posted a total of KES 90.2 billion premiums paid to insurance companies against a projection of KES 108.3 billion for 2012. The report, which was compiled by Business Monitor International, states that the sector’s outlook is positive, up until the next 4 years.
On the other hand, Makove mentioned that insured parties were not satisfied with the current variety of insurance products available in the market, noting that this had led to poor pricing and inadequate disclosures on vital information.
“Our aim is to build a better, stronger and more stable insurance sector that will give more confidence to the consumer and empower insurance companies and their intermediaries to deliver more relevant, affordable and creative services to their customers,” said Makove.
The draft set of guidelines includes the following:
1. Risk Management and internal controls -The aim is to ensure that insurance companies are managed in a sound and prudent manner by having in place systems for identifying, assessing, monitoring, and mitigating the risks that affect their ability to meet their obligations to policyholders. These systems, together with the structures, processes and policies supporting them, are referred to in these guidelines as the insurer’s risk management framework.
2. Reinsurance-The aim of reinsurance is to reduce volatility, and thus the uncertainty of the insurer pricing risks, by pooling. This is done to increase the probability of survival of the insurer over a given time. In purchasing reinsurance, insurers seek to stabilize their financial performance and to improve their security through the pooling of risk.
3. External Auditors– Aims to ensure the company reports accurately its financial position on an annual basis and to act as a cross check on an insurer’s financial reporting function. The Guideline requires all insurers to have their financial accounts audited on an annual basis in accordance with International Financial Reporting Standards. A qualified, independent external auditor is essential for accurate financial reporting of an insurer.
4. Actuarial function for the insurance companies-The aim of this guideline is to ensure the technical functions, including product pricing and reserving of technical provisions be carried out by suitably qualified staff. Such staffs are required to hold actuarial qualifications, as set out in this Guideline. In order to ensure that key stakeholders are kept informed in respect of the financial status of the insurer, the actuarial function has the additional responsibility of reporting to both the Board of the insurer and to the Authority.
The IRA used the workshop as a platform to enforce their mandate as is in line with the Risk Based Supervision clause stipulated in Cap 487 of the Insurance Act.