the role of pcf in client compensation presentation to public servants kapenguria 27 th november...
TRANSCRIPT
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THE ROLE OF PCF IN CLIENT COMPENSATION
PRESENTATION TO PUBLIC SERVANTSKAPENGURIA
27TH NOVEMBER 2013
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Presentation Outline
1. Background
2. Introduction
3. Stakeholders
4. Performance of mandate
5. Way Forward
6. The Role of Public Servants
7. Conclusion
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BACKGROUND
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Background
Constitution of Kenya
Article 46 – Consumer Rights
(1)Consumers have the right –
(a) to goods & services of reasonable quality
(b) to the information necessary for them to gain full benefit from goods & services
(c) To the protection of their health, safety, and economic interests
(d) To compensation for loss or injury arising from defects in goods & services.
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Background
Financial Services in Kenya Banking Capital Markets Insurance Microfinance Pension Savings and Credit Co-operatives
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BackgroundInsurance in Kenya 50 Insurance Companies Insurance Business Categories General Insurance Long – term Insurance Composite Insurance
Industry characterized by overall growth & accounts for 3.1% of the Gross Domestic Product.
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Background
Kenyan Insurance Sector characterized by the collapse of several Insurance Companies :-# Name of Insurer Class of
BusinessYear
1. Kenya National Assurance Co. Ltd.
Composite (Life & General)
1996
2. Access Insurance Co. Ltd.
General 1998
3. Stallion Insurance Co. Ltd
General 2002
4. Lake Star Insurance Co. Ltd
General 2002
5. Liberty Insurance Co. Ltd
General 2003
6. United Insurance Co. Ltd
Composite 2005
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Background
Reasons for collapse1. Mis-management2. Fraud3. Non-compliance with law4. Uncompetitive practices5. Lack of competence6. Re-insurance failures7. Economic Downturns
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Background
Effects of a collapsed Insurer• Shareholders – Loss of investment• Employees - Loss of jobs & incomes• Suppliers - Loss of revenues for goods &
services• Sector’s (Insurance & Financial) –
Instability• Government – Poor Economic
performance
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Background
Effects of a collapsed Insurer on a Policyholder# General (Non
Life) InsuranceLife Insurance
1. Exposure to Risks
2. Loss of Premiums
3. Loss of Assets Loss of Savings
4. Litigation Reduced benefits
5. Negative Perception to insurance
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Background
Need for Compensation to:
1. Protect policyholders from losses
2. Protect policyholders from exposure to risks
3. Protect policyholders from litigation
4. Promote confidence & stability in the insurance industry.
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Background
Government initiated Insurance Sector Reforms
THE GOVERNMENT - MINISTRY OF FINANCE
INSURANCE REGULATO
RY AUTHORITY
POLICYHOLDER
POLICYHOLDERS
COMPENSATION FUND
COLLEGE OF
INSURANCE
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Background
Financial Services
Regulator Protection Scheme
1 Insurance Insurance Regulatory Authority (IRA)
Policyholders Compensation Fund (PCF)
2 Banking Central Bank of Kenya (CBK)
Deposit Protection Fund (DPF)
3 Capital Markets Capital Markets Authority (CMA)
Investors Compensation Fund (ICF)
4 Pension Retirement Benefits Authority (RBA)
-
5 Savings & Credit Co-operatives
SACCO Societies Regulatory Authority (SASRA)
-
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INTRODUCTION
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Introduction
The Policyholders Compensation Fund (PCF) is an insurance compensation scheme established for the primary purpose of protecting the policyholders of an insolvent insurance company by paying them compensation for their unsettled claims.
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Introduction
Secondary purpose is to develop the insurance industry through:i) Promoting confidence by safeguarding the interests of policyholders.ii) Advising the Government on insurance consumer protection (compensation) policy.
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Introduction
PCF is:
i) established under the provisions of the Insurance Act.
ii) a state corporation under the Ministry of Finance.
iii) Governed by a Board of trustees and operated by a Managing Trustee.
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Introduction
VisionTo be a world class policyholder
protection and compensation Fund
MissionTo create confidence in the insurance
industry through compensation to policyholders of an insolvent insurer.
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STAKEHOLDERS
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Stakeholders
Policyholders They are the Fund’s purpose of
existence.
Beneficiaries: The Fund pays them compensation for their unsettled claims in the event their insurer becomes insolvent.
Contributors: Contribute to the Fund by paying a levy.
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Illustration
ABC INSURANCE CO. LTD Authorization Date 27/11/2013
DEBIT NOTE No. xxxInsured: A.N. Other Cover From:
27/11/2013
Policy Number: XXX/XXX/XXX To:27/11/2013
Regarding: RENEWAL PREMIUM
Class of Business: XXX
Currency: KShs.
Basic Premium 10,000.00
PH Levy (0.25%) 25.00
Training Levy 20.00
NET PREMIUM PAYABLE 10,045.00
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Stakeholders
Insurers Issue insurance policies. Contribute to the Fund by paying a
levy. Benefit from the enhanced
confidence & stability of industry.
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Stakeholders
Insurance Regulatory Authority Strategic Partner of the Fund
Insurance Entities• Receiver Managers• Liquidators• Loss Assessors
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Stakeholders
The Government
• The Fund is a State Corporation.
• Government’s interest is to develop financial sector by promoting insurance business through safeguarding the interest of policyholders.
• The government may be required to fund the operations of the Scheme from time to time.
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Stakeholder Relationship
Insurance Companies Insurance Brokers Loss Adjustors Statutory Managers Liquidators
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HOW DOES THE FUND PERFORM ITS
MANDATE?
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Performance of mandate
The Fund performs its mandate by:
i) Collection of fundsii) Payment of Compensation
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Collection of Funds
Sources Contributions paid by policyholders &
Insurance Companies. Penalties payable under the Insurance Act
& PCF regulations. Interest from the investment of Surplus
assets. Monies appropriated by Parliament. Grants or Donations to the Fund Loans borrowed for the purposes of the
Fund Reimbursements
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Contributions per Business Class
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Collection of Funds
Total Contributions collected as at 30th June 2012 - KShs. 2.1 billion.
General Business - KShs. 1.89 Billion
Long Term Business – KShs. 210 million
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Payment of Compensation
The Fund shall only pay compensation when an insolvent insurer is wound up.
An insurer shall be considered insolvent if:
i) It is declared by the courts due to its inability to pay its liabilities
ii) It does not meet solvency/liquidity requirements set out in the Insurance Act.
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It is thus a scheme of last resort.
Compensation – Insolvency Process
STATUTORY MANAGER
HIGH COURT
LIQUIDATOR
PCF
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Compensation – Status of Companies# Name Busines
sStatus
1 Kenya National Assurance Company (2001) Ltd
Life Paying benefits as closed life fund
2 Invesco Assurance Co. Ltd
General Operational
3 United Insurance General Statutory Management
4 Standard Assurance Co. Ltd
General Statutory Management
5 Blue Shield Insurance Co. Ltd
General Statutory Management
6 Concord Insurance Co. Ltd
General Statutory Management
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Compensation - Eligible claimantsAny policyholder with a Kenyan
issued policy may claim from the Fundexcept those with….
i. Claims arising before the fund commenced its operations in 2005.
ii. Claims arising after an insurer is placed under statutory management.
iii. A policy of re-insurance.
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Compensation – Policies CoveredLONG TERM INSURANCE GENERAL INSURANCE
Life Assurance Aviation Insurance
Engineering insurance
Fire Insurance
Liability Insurance
Marine Insurance
Motor Insurance
Personal Accident
Theft Insurance
Workmen’s Compensation & Employer’s Liability Insurance
Miscellaneous Insurance
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Compensation - Payment
Amounts payable as Compensation shall be determined by the Board in consultation with the Minister.
Current amount is KShs. 100,000 per policyholder claim.
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Compensation – Time Limit
A policyholder has up to two (2) years from the date of insolvency of an insurer to lodge a claim with the Fund.
No claim made after the lapse of 2 years is entitled for any compensation from the Fund.
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Compensation - Conditions
Compliance to conditions imposed by the Fund Claims shall be submitted to the
Fund in the required format relevant support documentation Claimants must make an honest
disclosure Avail any other information, whether
on oath or otherwise.
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Compensation - Challenges
Fund has not paid compensation to date.
Extensions of Statutory Management period.
Slow judicial processes for the winding up of insurers.
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THE WAY FORWARD
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The Way Forward…
a) Review of compensation amounts Increase from KShs. 100,000
b) Streamline compensation process Shorten payment process
c) Develop strategic partnershipsd) Conduct public education campaignse) Legal reviews & amendments
Improve laws & regulations
f) Expand the mandate of the Fund Increase coverage to other categories of
policyholders
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THE ROLE OF PUBLIC SERVANTS
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The Role of Public Servants
1. Buy insurance to cover your risks.2. Use insurance as additional saving
method.3. Educate the public on the benefits
& importance of insurance4. Protect the public by informing
them of their rights about insurance.
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CONCLUSION
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Conclusion – PCF is a safety net
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Thank you.
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Policyholders Compensation FundPostal Address: P.O. Box 24203-00100
NairobiPhysical Address: 2nd Floor, Zep-Re Place,
Longonot Road, Upper HillTelephone: (020)4996000
Email: [email protected]