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Kenya: New Rules Spell Out Payments for Insurance Claims

Business Daily (Nairobi)

George Ngigi

9 January 2012

The insurance market regulator has set the minimum amount of money that should be paid out as compensation to motor vehicle owners to protect policy holders.

The rules come as a relief to consumers who are in most cases compensated money that cannot cover losses incurred.

These are part of the uniform policies that the Insurance Regulatory Authority (IRA) has set to ensure products sold in the market are presented in a simplified, clear and standard language.

“The small print in policy documents is an inconvenience in reading and understanding. Our intention is to make them easily understandable to consumers and remove any ambiguity,” said Sammy Makove, the commissioner of insurance.

The standardised contract documents have set floor limits for different occurrences and the rules will come into effect from February 1. There are different limits for private, commercial and passenger service vehicles.

For example, the authorised repair limit for both private and commercial vehicles has been set at Sh50,000.

This relates to loss or damage to the vehicle or its accessories and spare parts while in or on the vehicle.

Mr Makove said he hopes that the standard policy will not only earn the industry consumer confidence, but also lead to increased penetration.

Complexity of policies and failure to meet consumer expectations owing to obscure exception clauses have hampered uptake of insurance products.

Data from the Association of Kenya Insurers (AKI) shows that Sh20 billion was collected from both private and commercial motor vehicles in 2010 and Sh13 billion was paid out as claims, but once the new rules are effected the claim payments by insurers are expected to rise.

Industry insiders hailed the policy’s uniformity in interpretation of clauses while still leaving room for innovation and competition.

Wait longer

“The policy is the bare minimum but an improvement can be given which will then distinguish a company from its competitors,” said Isaac Ngaru, a managing partner at Ngaru and Associates Limited.

The market will, however, wait longer for a schedule on structured compensation for accident victims following a challenge of its practicability in the courts.

The structured compensation–indicating the claim for each risk–will rule out the necessity of litigation as the amount to be paid out will be known to all parties.

High judicial awards have been blamed for collapse of some insurance companies. Structured compensation will also streamline the claim process.

Insurance law requires firms to process claims within 90 days but this has often been delayed.

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