Kenya has published new regulations to control the operations of banks offering insurance services.
National Treasury Cabinet Secretary Henry Rotich published the Bancassurance Regulations 2018, whose objective is to streamline the conduct and mode of operation of bancassurance business.
The regulations give the Insurance Regulatory Authority (IRA) the powers to supervise commercial banks offering insurance services.
Previously, banks offering insurance business operated under the regulations governing insurance brokers.
The new regulations clarify that banks offering insurance services are intermediaries of insurance companies, not underwriters.
“A person licensed to conduct bancassurance business shall only act as an insurance intermediary and shall not undertake or engage in the actual business of underwriting of risks or give the impression of being the underwriter of the insurance products to its customers,” states the regulations.
Kenya joins Uganda, which has also enacted laws to streamline the operations of bancassurance to drive penetration of insurance.
Insurance penetration in Kenya stands at 2.73 per cent while in Uganda it stands 0.88 per cent, Tanzania 0.9 per cent and Rwanda two per cent. The penetration in the region compares badly with world average of 6.28 per cent.
In Rwanda, insurance players have also been calling for a review of the insurance law to allow local banks to venture into bancassurance.
Data by the IRA show there are 26 licensed bancassurance agents in Kenya, up from 19 in 2015.
In 2016, 46.3 per cent of the total industry premiums were sourced through insurance agents, 37.5 per cent through brokers including bancassurace and 16.2 per cent directly.
According to Tom Gichuhi, Association of Kenya Insurers chief executive, bancassurance offers a major avenue for distribution of insurance products and is expected to significantly contribute in uptake with the new regulations.