Insurance agents cry foul as business drops

Termination of insurance agents will negatively impact penetration of the financial service, Bima Intermediaries Association of Kenya has said.

“Insurance agents are leaving the industry in droves and with it lack of growth of the industry in real terms, as far as penetration of insurance is concerned,” BIAK chairman Washington Ndegea told the Star.

Data by the Insurance Regulatory Authority shows that between October 2016 and February 2017, the number of underwriting agents declined 11.87 per cent to 6,481 agents down from 7,354 agents.

The recently released quarter-one industry report shows that the net spending on intermediary commissions dropped 6.41 per cent to Sh2.92 billion from Sh3.12 billion during the same period last year.

This was despite a significant growth of 522.61 per cent for gross premiums in the long-term business segment to Sh1.21 billion during the period compared to a loss of Sh286.24 million last year. Premiums from the general business segment also went up 9.61 per cent to Sh41.56 billion from Sh37.92 billion last year.

“It is possible that commissions have decreased in spite of a growth in premiums because the commissions’ payable under various classes has decreased,” Ndegea said.

He attributed slow business to clawback-insurance firms taking back commissions earned by agents.

“This is occasioned especially by life companies unfairly clawing back commissions where the agent has not attained consistency in business brought. It is a controversial system that has demoralized agents,” Ndegea said.

He said that agents were also facing wrongful termination by the underwriters in the event they failed to reach targets set by the firms which Ndegea termed as “unattainable”, adding that there could also be an increase in direct business to the insurance firms.

“This system of terminating agents on flimsy grounds is unfairly enriching companies and impoverishing agents,” Ndegea said. “Termination of an agent means the company is getting business from zero expense, the reason it has become so rampant and popular in the industry.”

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