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{
    "id": 871928,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/871928/?format=api",
    "text_counter": 207,
    "type": "speech",
    "speaker_name": "Nyeri Town, JP",
    "speaker_title": "Hon. Ngunjiri Wambugu",
    "speaker": {
        "id": 13460,
        "legal_name": "Martin Deric Ngunjiri Wambugu",
        "slug": "martin-deric-ngunjiri-wambugu"
    },
    "content": "Introduction of an index-based insurance is very important. The issue of structuring micro- insurance and giving it a platform and a structure is also very important. Of course, what seems to have been the fundamental objective was to reduce fraud. I stand as a minority listening to what the other speakers have been saying. I have quite a problem with the issue of brokers keeping premiums. There is a very big difference between an insurer and a broker. An insurer undertakes to compensate a client in case of loss. A broker sells or advises clients on the most appropriate policies for the risks they have. For insurers to do their work, for them to be effective and for us to reduce fraud, the insurers need to get the premiums for whatever risks they have undertaken to take before they offer a policy. I hear my colleagues arguing that if we get brokers not to deal with premiums, we are going to kill the industry. Brokers do not earn premiums, they earn commissions. If brokers were arguing that they should be allowed to hold their commissions and then pay the difference to the insurance company, I would have no problem. What I have seen as a problem is where the brokers argue that they should be allowed to hold the premiums while the insurer undertakes covers. They argue that they hold the premiums for 30 days. When you take an insurance policy, you are on cover the minute you get the contract, meaning that in case a loss happens that night or the next night, the insurance company has to pay you. First and foremost, I do not understand why the broker is holding premiums for 30 days because that money does not belong to him. It belongs to the insurance company. Two, during this period when the broker is holding premiums, if a loss happens, the insurance company is obliged by law to pay the policy holder for that loss. However, the insurer has not received premiums for that policy since the premiums are still with the broker. This is my problem with this Bill. I am quite concerned. The initial Bill was fine as far I am concerned. The amendments I hear being proposed are my problem. The initial Bill said that an insurer would not go on cover until they have received their premiums. That makes sense because we need to distinguish between an insurer and a broker. We need to give the insurer what belongs to the insurer and give the broker what belongs to the broker. For the brokerage industry to argue that if they are not allowed to hold premiums, they will collapse is to confirm to us that the reason we are having a problem in the insurance industry is because brokers are retaining premiums. The work of a broker is to advise the client, give him a policy, take it to the insurer and earn his commission. I am hearing arguments saying that if the broker does not keep the premiums, the industry is going to collapse. That tells me where the problem is in this industry. The problem in this industry is that brokers are holding premiums that belong to the insurance companies. In my opinion, I do not think it is good for this House to support a Bill that is basically making it legal for brokers to hold money that does not belong to them. As a House, we are passing a law that gives brokers authority to stay with money that does not belong to them for 30 days. Then we are telling the insurance companies that you have to take cover even if you have not been given the premium. We are hurting the insurance companies and that is part of the reason this country has less than 10 per cent insurance penetration. We are hurting the insurance companies because we are telling them… For example, if you take a policy like for this House of 400 Members, pay about Kshs100 million to a broker, you tell the broker to hold that money for 30 day, so he has a couple of million shillings in his account for 30 days which he can trade with or even go and buy a Government bond for 30 days. So, he traded with money that does not belong to him. Meanwhile, the insurance company has cover effective immediately, so that if a Member here has to go to hospital, the insurance company has to pay. However, they The electronic version of the Official Hansard Report is for information purposes only. Acertified version of this Report can be obtained from the Hansard Editor."
}