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"id": 236008,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/236008/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
"slug": "amos-kimunya"
},
"content": " Mr. Temporary Deputy Speaker, Sir, I beg to move that The Insurance (Amendment) Bill be now read a Second Time. Mr. Temporary Deputy Speaker, Sir, the Department of Insurance within the Ministry of Finance was formed in 1987 under the Insurance Act, Cap.487 of the Laws of Kenya. Its mandate is to administer the Insurance Act which includes the regulations, supervision, development of the insurance industry and to protect the interests of the policy holders as well strengthening the industry to improve its contribution to economic growth and development. Before its creation, there was no consolidated and co-ordinated insurance legislation for the regulation and supervision of the insurance industry and such regulation was done from a desk in the Treasury. Mr. Temporary Deputy Speaker, Sir, it is important for the economy to have a properly restructured system of insurance provision oversight which ensures that the greatest degree possible were that the insurers will have the financial resources to pay all claims as they become due which basically means that there is supervision. Secondly, that insurers will treat consumers in an equitable manner in all financial dealings which basically brings the issue of marketplace supervision. Mr. Temporary Deputy Speaker, Sir, the business of insurance has a number of special features which make financial supervision particularly important. In transacting insurance business, the insurer receives premiums from persons and corporations who are seeking cover. These premiums together with the investment earnings should be sufficient to not only pay the claims that would be incurred during the time of the policy but also to cover the administrative and other expenses associated with writing and distribution of the products, and lastly also to generate a 3542 PARLIAMENTARY DEBATES November 8, 2006 satisfactory rate of return to the shareholders in terms of profits of the insurance company. Mr. Temporary Deputy Speaker, because premiums are paid now to purchase a benefit which may not mature until many years in the future, the purchaser of insurance is entirely reliant on the expectation that the insurer would still be in business at that unspecified future date that will have sufficient financial resources to discharge its obligation. Mr. Temporary Deputy Speaker, Sir, in this changing and uncertain world, it is not a foregone conclusion that this will always be the case given the difficult and volatile economic circumstances found in developing countries, nor can one rule out the possibilities of negligence or unscrupulous behaviour rather than difficult economic circumstances would be the cause of the company's inability to pay. There are many examples in this country of this failure in the past. A system of regulatory oversight is, therefore, required to help assure that a company having such an important responsibility to the public would be able to meet its financial obligations as and when called upon to do so. Mr. Temporary Deputy Speaker, Sir, in terms of the marketplace characteristics, there are also particular features of insurance business which are different from other types of financial institutions which require a robust regulatory system. When a customer deals with a bank deposit taking institution such as the ones we have just passed here for banks, there is no great likelihood of a dispute. The customer has made a deposit and has evidence of having done so and the institution is clearly obligated to return the deposit upon demand or subject to particular conditions governing the transaction. Mr. Temporary Deputy Speaker, Sir, by contrast, an insurer is providing indemnity with respect to circumstances that are often much more complex than a banking transaction and to protect the company, many exclusions and other terms of coverage usually apply. Unfortunately, this contractual complexity tends to put the insurer in a position of strength when the time to settle a claim comes. The insurer, has the legal and financial resources to dispute a claim even if under a technicality. Also the insurer has possession of the funds and the policy-holder is dependent on the insurer to gain access to them. By unfairly resisting claims an irresponsible insurer is, therefore, in a position to retain funds rightly due to policy-holders and it can be difficult for policy-holders to protect themselves against such abuses. Thus we see that in accessing the risk of both insolvency and unfair consumer treatment, there are special reasons why insurance regulatory systems are important in building public confidence and providing the stability of financial infrastructure that every country finds desirable."
}