MPs back quick pay for policyholders in collapsed insurers

Policyholders will be guaranteed quick compensation in case an insurance firm goes under if Parliament approves changes to the Insurance Act.

Under the proposed changes, the receiver manager will have 12 months from the date of appointment to prepare and submit to the Commissioner a report on the financial position of the distressed insurer and advice on revival or liquidation.

Policyholders will then get their compensation immediately in case of a dissolution.

A parliamentary committee wants the House to approve the changes contained in the Insurance (Amendment) Bill, 2019, sponsored by Leader of Majority Aden Duale.

“The committee observed that if enacted into law, the bill will encourage more people to invest in insurance since they will be guaranteed a quick compensation in case an insurance firm is placed under statutory management,” Joseph Limo who chairs the Finance and National Planning committee said in a report on the bill.

“It empowers the Insurance Regulatory Authority (IRA) to prescribe the manner of submissions of various kinds of returns and provide for a penalty for late submission, which shall be payable into the policyholders’ Compensation Fund,” Mr Duale said in the bill’s memorandum.

The proposed law will compel insurers to prepare claims payment returns and submit them in a manner prescribed by IRA.

Insurers who fails to prepare and submit financial returns at the end of each year shall be liable to a penalty of Sh200,000 and a further penalty of Sh10,000 for each day after the expiry of the prescribed period within which the return is to be submitted.