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"speaker_name": "Mr. Sungu",
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"content": "Thank you, Mr. Temporary Deputy Speaker, Sir. I said that I used to practise as an Insurance Loss Adjuster in this profession. I have a wide knowledge from my practice. I am only glad that this Bill has been brought to the House now. In fact, it is an idea which should have come a long time back. It is a pity that the Ministry dragged its feet. Mr. Temporary Deputy Speaker, Sir, we are now creating an autonomous Insurance Regulatory Authority (IRA), with the Board of Directors and Commissioner of Insurance funding November 14, 1006 PARLIAMENTARY DEBATES 3625 the arrangement. The IRA will be vested with power to enforce the law. They have even been allowed insurance premium tax, insurance premium levy and insurance trading levy. This is no minced meat because, as we know, insurance is a very important industry in this country. In fact, the insurance industry is formulated on the basis of utmost good faith. Insurance is an invisible product. It is not like a piece of cloth, car, or something that we can see and sell. We pay premium in the hope that if we have a claim, then we will get compensation. That is the basis of it. In the United Kingdom (UK), for example, the Lloyds has earned a lot of money from this invisible business. Therefore, the first thing that must be utmost in our minds, when making this law, is that we must operate on the principle of utmost good faith, or as we used to refer to it, oberima fides . We must then be able to ensure when we create the office of the Commissioner of Insurance, that he is given teeth to actually work and make sure that his decisions are respected. The Commissioner is vested with powers of supervision, regulation and control. He is supposed to formulate standards for the conduct of insurance and reinsurance business. Mr. Temporary Deputy Speaker, Sir, my colleagues have talked about the various strata of the insurance industry; beginning with agents, brokers, insurers and claim settling agencies like loss adjusters and surveyors. We ought to define these very clearly. This is because when we enact a law here, it must protect the common man. We must protect the common good and the public. It has been said here, and it is true, that, in fact, people are being fleeced by agents. In this Bill, an agent is defined as a person, not being an employee of an insurer, who in consideration of a commission, solicits or procures insurance business for an insurer or broker. I handled a case recently, where an agent received premiums and failed to remit them, maybe by some arrangement with the insurer. As a result, the insured lost a vehicle costing millions of shillings. He was in tatters until I intervened. That sort of thing should not be allowed. The issue of the agents and brokers is also important. As we all know, the broker is a bigger element in terms of the insurance industry. They are more professional. In fact, their requirements of entry to that market are also higher. They do business for and on behalf of an insurer or insured. That is confusing. The broker is the only person who should be allowed to represent the insured because he has got proper knowledge of insurance. We will bring amendments at the Committee Stage to this effect. I hope that the Minister will agree with them. Mr. Temporary Deputy Speaker, Sir, when it comes to delay of payment, many people do not realise that businessmen in various sectors of the economy acquire loans to start their businesses. Even when they make losses, the banks will still demand for the monthly repayment of the loan. They can actually go into penalties and lose their business. So, it is imperative that the Office of the Commissioner of Insurance, which we will now give more powers, ensures that there are no delays in settlement of claims. Mr. Temporary Deputy Speaker, Sir, the lawyers or the so-called \"ambulance chasers,\" should no longer exist in this industry in Kenya, more than 40 years after Independence. Most of them have been taken to court severally, and they know how to squeeze their way out. We know of cases where some of these people even put in fictitious claims of accidents They lodge big claims with the help of some people in the industry, and this has caused some insurance companies to collapse. Access Inssurance Company was one of them. Why do the insurance companies not implement the two-cheque system? When this system was proposed, there was a lot of hue and cry from our brothers, the advocates. I want to suggest that this is one of the things we must put into law. After the amendment of the Act, Cap.487, we can amend any section of the law. I do not believe that these amendments are needed only for the creation of the Authority. Mr. Temporary Deputy Speaker, Sir, the issue of false claims is also important. There must be a mechanism of making sure those entrusted with investigations are held accountable. There are many ways of doing this. We can put it into law that some of these people entrusted with the 3626 PARLIAMENTARY DEBATES November 14, 2006 responsibility of signing claims totalling to millions of shillings should sign personal guarantees. They should undertake that if a claim is found to be incorrect or false, they will pay its value from their own coffers. Mr. Temporary Deputy Speaker, Sir, we have looked at the objects and functions of the proposed Authority. I agree with them entirely. On the question of the Board of Directors of the Authority, I want to agree with the sentiments of my colleagues. We need to give this proposed Authority some independence. We need to draw from those with knowledge and background in the industry. Therefore, we ought to specify that insurance brokers and other practitioners in the insurance industry will not be included in this Board. We must also address the issue of the qualifications of the five members of the Board. Mr. Temporary Deputy Speaker, Sir, the appointment of the chairman by the President on the recommendation of the Minister leaves a question mark. The provision says: \"The chairman of the Authority will be a person having knowledge or experience in matters relating to insurance, finance, banking or actuarial science\" I beg to submit that this be limited to those with a background in insurance, including related studies and actuarial science, rather than finance and banking. People in these two areas have their own boards that they can fall back to. Mr. Temporary Deputy Speaker, Sir, on the creation of the office of the Commissioner of Insurance--- I happen to know that the current Commissioner of Insurance, with whom I worked a long time back, has done a tremendous job. However, we do not know who is going to come next. It is, therefore, necessary to implement what my colleagues have said. Mr. Temporary Deputy Speaker, Sir, the appointing authority is amorphous. The relevant provision talks of \"the Board, in consultation with the Minister\". We need to be very precise on this. We must not make a law that is ambiguous and that leaves room for question marks. Insurance is a very technical subject, as the Chair is aware. The Commissioner of Insurance must have an insurance background. Forget about accounting, finance or banking. Those are entirely different areas. We need a person with insurance background, because issues of insurance are technical. This is a different field of study, and if you bring into it somebody from the banking sector, he or she may be lost. The Commissioner of Insurance will be required to give direction to people with experience in the industry. If you bring in somebody without the relevant qualifications, they will be twisted around. Mr. Temporary Deputy Speaker, Sir, Clause 4(c) says: \"Where there is conflict between the provisions of this Act and the provisions of any written law with regard to the powers and functions of the Board or the Authority under this Act, the provisions of this Act shall prevail\". I think that is right because the only law it cannot go against is the Constitution. Mr. Temporary Deputy Speaker, Sir, we have looked at the duties of the Commissioner of Insurance. Let me just say in general that Section 5(1)(a) has been deleted. However, this section specified some very important aspects of the duties of the Commissioner of Insurance. By deleting this section, there will a vacuum in this respect. I would like to suggest that the section be re- introduced. It defines the duties of the Commissioner of Insurance as including the formulation of standards in the conduct of the business of insurance. The other duties are okay. Mr. Temporary Deputy Speaker, Sir, when you look at the entire Act which we are amending, you will notice that there has been no change in the penalty. Under Section 7, if there is failure by a member of an insurance company to supply information, books, documents, et cetera, the fine is only Kshs10,000 or 12 months' imprisonment or both. You will agree with me that when this Act was enacted in 1972 and became operational in 1989, Kshs10,000 was a lot of money. Right now, Kshs10,000 is too little to be a penalty. I am of the view that if we are going to have a November 14, 1006 PARLIAMENTARY DEBATES 3627 penalty, it must be sufficient to discourage people from committing offences. The same thing applies to all the fines in this Act. Mr. Temporary Deputy Speaker, Sir, when we talk about giving the Commissioner of Insurance teeth to ensure that this industry runs properly, this is very important. We know for certain that many companies have collapsed due to mismanagement. We know that many companies have practised imprudent management. The detailed provisions are okay, but the punishment prescribed is too low. As I said before, let us have the kind of punishment that will encourage compliance and discourage non-compliance. Mr. Temporary Deputy Speaker, Sir, the companies that have collapsed due mismanagement to include the Kenya National Assurance Company. Many wananchi suffered. In fact, those who suffered most were those who had insured their lives. Some people are still suffering. They have not been paid their dues. I hope that their plight will be taken into consideration. The insurance industry is of major importance because it is an element of the financial sector that provides security to the rest of the other businesses to operate without fear. With those few remarks, I beg to support."
}