Date Posted: 2/7/2012 5:05:42 AM
Posted By: maxwellgoko Membership Level: Bronze Total Points: 45
Insurance business refers to the business of undertaking liability by way of insurance (including reinsurance) in respect of any loss of life and personal injury and any loss or damage, including liability to pay damage or compensation, contingent upon the happening of a specified event. It aims at reducing or completely eliminating certain measurable risks of economic loss. They include life protection property and health through payment of a fee called the premium as consideration for indemnity should the risk insured against occur. Generally, this involves transfer of risk from the insured to the insurer.Insurance business dates back to the colonial period when Kenya was colonized by the British. Colonialism had its impacts both positive and negative and insurance business is one of the impacts. The white settlers invested largely in the Kenyan land especially farming and agriculture. Like the Italian merchants, the settlers realized the need to protect these investments against various forms of risks. They expanded their conquest and so were their investments. This gave rise to demand for insurance cover. They took advantage of the situation and established insurance agencies. Development of these colonies led to expansion of the colonizers insurance networks to cater for the growing insurance demands. All the insurance institutions were owned by British insurers. The earliest insurance companies include ; Pioneer Assurance Society 1930, Jubilee Insurance Company 1937 Pan Africa Insurance 1946 and Provincial Insurance Company Limited 1949. By 1963 the time for Kenyan independence, the insurance institutions had been upgraded to full insurance companies.Before independence, insurance business in Kenya like other developing countries had no established insurance legislation. The business was regulated by the Companies Act. However in 1963 with attainment of our independence, the United Nations Conference and Trade Development helped Kenya realize the need for the legislation to control the growth of insurance business industry and the country’s economy. As a result, Insurance Ordinance of 1960 was promulgated. Its main function was to control the establishment, financing and working system of the insurance companies. Two policies were developed and formalized in 1994 and 1972 respectively. The first one recognized a sound national insurance and reinsurance market as an important characteristic of economic growth. The other policy invited developing countries to take measures aimed at promoting reduction of dependability on international insurers and re-insurers and domesticate competitive reinsurance terms and conditions from international insurance business. It is as a result of the above efforts that the Insurance Act cap 487 was enacted in 1986 and enforced in January 1987. The act provided for the office of a regulator and the requirements for registration of insurance and reinsurance companies and other players in the field like the agents and brokers.According to the 2002 report, forty (40) years after independence, Kenya’s insurance business has grown to a higher level. There were 41 registered insurers 15 of them transacting general insurance business 2 life insurance business 24 acting as composite insurers. Today 2011, the number of registered insurers has increased to 46 insurance companies which is a good sign f development in that sector. Kenya leads in East Africa against Tanzania and Uganda and it is the key player in the COMESA region.After independence, the ownership of the insurance companies shifted to the government of Kenya. The government enacted and enforced Insurance Act cap 487 of 2010 under which the insurance business was governed. The 2008 Kenya guide gives the top four insurance companies in Kenya today as; The British America Insurance Co (K) Ltd which was established in 1965, Priory it offered home based services but it has now developed to a full financial service provider. The next is UAP Provincial Insurance Co. Ltd, and then Pioneer Assurance Co. Ltd which is an insurance broker and the fourth is the C. I. C Cooperative Insurance Company of Kenya Ltd. Currently, the legal and institution framework of insurance business derives from the Insurance Regulatory Association (IRA) and the Association of Kenyan Insurers (AKI). IRA was created by an amendment to the insurance Act in 2006 and came in operation on 1st may 2007. The vision is to be the leading insurance regulators in the industry. Its main functions are to regulate, supervise and develop insurance industry. Priory, these functions were undertaken by department of insurance in the ministry of finance. The purpose was to respond effectively to the shortcomings faced by the insurance sector. The IRA is steered by the Kenya’s vision 2030 to contribute to the economic growth from the current 2.5% to 5% by 2012. Their intention is;1.to formulate and enforce standards of conduct for insurance and reinsurance business,2.license all persons involved with the insurance business including insurance and reinsurance intermediaries, loss adjusters, assessors, risk surveyors and values.3.Protect the interests of insurance policy holders and insurance beneficiaries in all insurance contracts and enforce fairness to all.4.Advice the government on national policy to ensure adequate insurance protection and security for national assets and national properties.To achieve these, the IRA is guided by virtues such as integrity, team work, mentocracy, transparency and accountability. They want to ensure a stable insurance business for the national benefit. IRA can sue and be sued; purchase and dispose of property borrow and lend money.AKI was established in 1987 as a consultative and advisory and advisory board for the insurance industry. It was registered under societies Act cap 180. It is for all members registered under insurance Act to transact insurance business in Kenya. It major function is to bring 46 insurance companies together. Before, AKI was referred to as Insurance Association of East Africa. Its vision is to be a leading Insurance Association in Africa.Insurance business in Kenya has developed from no where and it is now the leading insurance business in East Africa. It has also registered a positive growth from the 2002 2.5% in 2004 and it is estimated to be 5% by 2012. This is in line with the vision 2030 plan. Insurance business being one of Kenya’s sources of income is expected to contribute highly to the economic growth and propel the achievement of Kenya’s vision 2030. With the IRA and AKI in place, there is a guaranteed protection and guidance of the industry to a higher rank. This of course will need the cooperation of both the regulators and the market players.
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