Kenyan agents rue introduction of bancassurance

The persistent complaints have forced the Insurance Regulatory Authority (IRA) to come up with guidelines on how bancassurance should be conducted. The guidelines were to be released to the market this month, but it is not clear if that deadline will be met as parliament is yet to debate them. Part of the draft guidelines states: “The bancassurance agent shall not induce or compel a prospect to buy an insurance product of its principal. All prospects shall be allowed to decide out of their own volition, which insurance product they wish to buy and from which insurer. Bancassurance has become popular with Kenyan banks despite the lack of regulation. Microfinance institution and savings and credit cooperative societies have also formed insurance agencies as subsidiaries.hideThe chairman of Bima Intermediaries Association of Kenya, Washington Ndegea, blames the IRA for failing to prepare the guidelines beforehand and therefore putting the agents at a disadvantage. One of the consequences is that insurance companies have started slashing life insurance commissions paid to agents as banks continue to generate more life insurance business. “We have noted that a number of companies have already reduced commissions. Others are delaying payment to agents,” said Mr Ndegea. Vincent Kabiru, general manager of Macly Insurance Brokers, said the IRA must act fast to ensure a level playing field. “Our main issue is that banks, which have set up in-house insurance agencies, are servicing their clients for all their insurance needs without giving those clients an option. The client should be given an option to choose an insurer, broker or agency of choice. The bank’s interests should only be noted in the policy,” he said. Chairman of the Association of Insurance Brokers of Kenya, Muchemi Ndung’u, agreed: “Bancassurance is cannibalising us into oblivion and this must stop. Competition is healthy, but it has to be regulated as what the banks are doing is not enhancing penetration but disrupting the insurance brokerage business.” But the IRA dismissed such sentiments by the agents and brokers. “We are happy with the way bancassurance is growing,” said chief executive of the IRA, Sammy Makove. Although the Association claimed several agents had quit business, data from the IRA shows licensed agents increased from 4,610 in 2014 to 5,579 in 2015. Bancassurance, however, is expected to peak this year as many banks spent 2015 putting up structures and learning the market. The coming year will therefore be most indicative of the effect bancassurance is having on agents. Agents and brokers account for at least 50% of policies sold, making them currently the largest single channel. But even as that happens, the IRA – in collaboration with the College of Insurance – is building a new network of agents in the counties, in what is expected to increase agent numbers to 100,000 in the near future. KPMG head of insurance in east Africa, James Norman, says Kenyan agents and brokers need to be innovative around the needs of the customer, rather than complaining about bancassurance. “Agents and banks can coexist easily because the space is big enough for everyone. The more the distribution channels, the more the penetration. The ultimate decision on distribution models will be made by the customers,” he said.

Kenyan agents rue introduction of bancassurance

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