The High Court has granted a reprieve to insurance agents and brokers by suspending a revised law that barred them from receiving customers' premium payments.
The law, which came into effect on 23 July, is now suspended until an application filed on 5 July to stop it is heard on 26 September, reported The Star.
Justice John Mativo stated in the court order, “The coming into force of the Insurance Amendment Act 2019 is hereby stayed pending the application.”
This means intermediaries can continue with their business of handling premiums and remitting them to insurance firms as was the case before the new law was passed
In contrast, the amendment to the Insurance Act had made it illegal for brokers and agents to handle insurance premiums, which had to be paid directly to insurers.
“An intermediary shall not receive any premiums on behalf of an insurer,” read part of President Uhuru Kenyatta’s memo to MPs advising the legislators to change the law after they had initially failed to pass it in Parliament.
The change to the Insurance Act was taken to minimise insurance fraud amounting to KES367m ($3.6m) in 2018, according to the Insurance Regulatory Authority.
Association of Kenyan Insurers CEO Tom Gichuhi told The Star that insurance brokers had been holding on to premiums longer than they should and using this as investment funds to gain income and in some instances failing to remit the premiums altogether. In the meantime, insurers had been rendered unable to pay claims to policyholders, he added.
The new Insurance Act 2019 was the result of lobbying by underwriters who claimed that more than KES40bn had yet to be remitted by brokers, affecting the payment of claims.
On 5 July, the Association of Insurance Brokers of Kenya (AIBK) instituted a legal suit challenging the revised law.
Through their lawyer Paul Muite, the brokers sued the National Treasury Cabinet Secretary, the Attorney-General and the Insurance Regulatory Authority, claiming the new law would result in wiping out insurance brokerage business in Kenya as well as jeopardise livelihoods.