OPINION: IRA could have done better on collapsed insurers

On March 10, the Insurance Regulatory Authority woke up and, at one fell swoop, placed three insurance companies under statutory management.

The regulatory fiat announced against Trident Insurance Company, Kuscco Mutual Assurance Limited and Corporate Insurance Company affected thousands, if not millions of policyholders and claimants.

I am told that Trident Insurance, for instance, boasted a sizable chunk of third party insurance business in the country.

In the public notice, IRA advised the insurer’s existing policyholders to “immediately seek alternative covers from other licensed insurers to ensure that there is no unnecessary exposure.”

For the multitude of affected, confused claimants, IRA directed them to the appointed statutory manager, the Policy Holders Compensation Fund, who- coincidentally 47 days before- revised the compensation limit for all classes of insurance cancelled through regulatory interventions.

In consort, the fund moved fast and issued a moratorium on the insurer’s payments to policyholders, claimants and other creditors for a period of six months commencing on March 10, a day before they took over.

Thus, a policyholder who had just bought premiums from either of the three insurers a few days into the IRA announcement would only get their money, a fraction of it actually, after August 10.

On March 11, traffic police swung into action, having been accorded early Easter holidays bonus. They threatened to issue tickets to all and sundry, including those who had not heard about the regulator's announcement, and foreigners alike.

There was neither notice period nor grace period within which to learn about the regulator's action and source for emergency funds to arrange for alternate covers.

Police read to their victims part of IRA’s stark notice; “immediately seek alternative covers from other licensed insurers” and they were game. Every complaint to the IRA in this regard was met with a firm response; “kindly contact the PCF, which has been appointed as the statutory manager.”

Granted, the regulatory action was taken to safeguard the interests of policyholders, creditors and the general public, and to stop further accumulation of risks and liabilities.

However, the manner in which this was done, the threat it poses to the country’s risk assessment, and the trust deficit it has occasioned in the sector is alarming.

Clearly, the regulator had foreseen this coming. It is not an ordinary decision to place not on one but three of the agencies you superintend over on a daily basis, on statutory management.

From its own confession, the IRA had issued “several regulatory interventions and directives” after noting “continued deterioration in the companies’ financial positions.”

In turn, clients were left to continue placing full trust in a sinking ship without any form of prior warning. In the end, they were left to their own devices, and a terrible option of waiting for PCF to compensate them after a long, torturous verification.

The bitterness was evident in IRA social media handles. Some people felt the IRA had deliberately connived with the insurers to condone the situation. Others felt there are more of the three out there, all waiting to collapse with client funds.

Conspiracy theories abound as to a possible scheme by competitors to take over the third party insurance business. All in all, the exposure to the ordinary Kenyan client is obvious and unsurprising.

Kenyans have grown a thick skin for being left high and dry. We are a tortured lot in every direction you look. But, in a fast evolving world of business and trade, a country’s reputation matters a lot.

In the last four years under the Kenya Kwanza administration, Kenya has spread its hands out there to attract investment and trade opportunities. Last week, we hosted the Kenya International Investment Conference with the principal aim of fostering global partnerships and opportunities to do business in the country.

These conferences mean nothing if regulators and duty bearers continue taking actions which on one hand purport to boost investors’ confidence while undermining it at the same time.

Unless Kenya wants to be an island, the insurance law must be amended to cushion existing policyholders from abrupt, unforeseeable measures such as the one taken by the IRA, and provide for quicker, full compensation of claims.

Much more important, the law must provide for full accountability.