IRA Tightens Rules on Insurance Claim Rejections

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The Insurance Regulatory Authority (IRA) is set to introduce new rules to address the growing issue of unfair insurance claim rejections in Kenya. The measures, outlined in a draft notice, aim to ensure policyholders receive fair treatment when lodging claims and that insurers provide valid, transparent reasons when declining them.

Under the Insurance Regulatory Authority new proposed rules, insurers will be required to honour claims even in cases where a driver’s licence had expired or premiums were unpaid, as long as the policy had not been officially cancelled. This move seeks to close gaps often used by insurers to deny legitimate claims, particularly in motor and medical insurance cases.

The proposed rules on insurance claim rejections in Kenya clearly outline specific grounds that will no longer be accepted as valid reasons for claim denial. These include late notification of a claim, non-disclosure of information that a policyholder could not reasonably have known, and pre-existing or congenital medical conditions that had not been previously diagnosed.

The IRA has also stated that insurers cannot reject claims based on misrepresentation unless the policyholder is found to have made a fraudulent or negligent misrepresentation of material facts. In cases where a breach of warranty or policy condition occurs, the insurer will only be allowed to reject the claim if the breach is directly connected to the loss.

Further, an insurer will not be permitted to repudiate a claim on the basis of late notification without first establishing and considering the reasons for the delay. This addresses common disputes where insurers dismiss claims solely because they were not reported immediately, even when the delay was justifiable.

The draft rules also specify that an insurer cannot decline a claim if the policyholder was never issued with the policy document at the start of the insurance cover. Additionally, claims cannot be rejected due to non-payment of premiums when the policy has not been cancelled, or where cancellation was made through an intermediary and not properly communicated to the policyholder.

One of the notable provisions is that insurers will be required to settle claims even if a driver’s licence had expired at the time of the accident, provided the driver was not disqualified from holding a licence. This measure targets frequent cases where insurance companies have rejected motor accident claims over minor administrative lapses.

According to the IRA, these reforms are designed to promote fairness, transparency, and accountability within the insurance industry. The authority emphasized that insurers must handle claims in good faith and avoid practices that disadvantage policyholders or lead to unnecessary disputes.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.