Wrangles mire insurance sector

By Jackson Okoth

The Association of Kenya Insurers (AKI) has distanced itself from the wrangles in the public transport insurance underwriting business, as hopes rise that those who lost their covers in the collapsed Invesco Assurance Limited could have their claims settled.

This comes one year after the Ministry of Finance, under whose docket the insurance sector falls, got recommendations from state-appointed taskforce, on how to deal with fraud in the Public Service Vehicle (PSV) underwriting business. The proposal has yet to be implemented.

And industry players say it is only a matter of time before another motor underwriter goes under, unless the recommendations are implemented.

An accident along one of Kenya’s roads. Eighty per cent of all claims in the insurance business are fraudulent, with the most prevalent cases involving PSV underwriting, and outpatient medical covers. Photo: File/Standard

"Problems are still there, and domino effect in the industry of collapsed underwriters will continue," said Nelson Kuria, chairman, Association of Kenya Insurers (AKI).

An apparent slowdown in the pace of reform in the insurance industry comes as collapsed Invesco Assurance Company, one of the largest players in the motor underwriting business, climbs out of insolvency.

"We shall be asking all those with claims against Invesco to forward their applications afresh, to enable us ascertain genuine from fraudulent claims," said Managing Director of Pinnacle Projects Limited, David Kuria.

Matatu Owners Association (MOA), a majority shareholder in Public Transport Investment Company, (formerly Invesco), hired Pinnacle Projects to assist in setting up the new outfit.

In the next six months, the firm is expected to raise Sh200 million from its shareholders, up its share capital, reopen branches, and begin settling claims.

"This is a new business, and we are currently networking with insurance brokers to set it all up again, said David Kuria.

Revival of collapsed Invesco Assurance comes despite the continued existence of the criminal infrastructure, which brought it and other motor underwriters down.

For instance, while the industry has called for introduction of a structured compensation system for third party claims, a powerful network of ambulance chasers is fighting the move.

"We should have a pre-determined framework for compensating victims of motor accidents, without the need of the interpretation by the courts, whose awards are usually arbitrary," said Kuria, the AKI boss.

Available figures indicate that 30 per cent of all claims in the insurance business are fraudulent, with the most prevalent cases involving PSV underwriting, and outpatient medical covers.

"The compensation system run by the courts makes it difficult for underwriters to accurately estimate their risks and liabilities," said Kuria.

The PSV underwriting sector is seen as a cash cow for fraudsters, whose network is so well entrenched, it has been blamed for the collapse of motor pools, which were meant to address weaknesses of the sub-sector.

Invesco is expected to be run by players in the public transport sector.