From February 14, 2025, insurance companies will be required to issue Marine Cargo Insurance Certificates digitally.This follows a directive that was issued recently by the Insurance Regulatory Authority (IRA), to ensure full compliance of the amended Marine Insurance Act CAP 390.
The changes done on June 23, 2017, made it mandatory for any person with insurable interest in marine cargo to place the cover with a locally licensed provider.Going forward, all importers will procure insurance through the digital platforms of home companies or through the Coral Mini App hosted on the M-Pesa Super App.
On a positive note, the mandatory requirement for digital purchase of insurance is expected to significantly boost the market share of locally licensed insurers. A larger pool of importers will be required to locally buy marine cargo cover, leading to a substantial rise in customer base. The increased business volume will translate into higher premiums and revenue for insurance companies, which will increase revenue for the government through taxable income.
The need for digital solutions will drive innovation in the sector leading to more efficient and customer-centric services, as well as more employment opportunities for Kenyans. Ultimately, the regulation will drive insurance reach in the country, leading to a more robust and resilient sector. A stronger insurance sector will contribute to economic growth by providing financial protection and risk management solutions to businesses.
It is, however, anticipated that implementation of this regulation could face significant challenges, including technical glitches and integration issues between different platforms. The amendments are also likely to result in an increase in the cost of marine insurance, due to the various charges at every point in the chain.
The digital nature of the process could increase the risk of cyberattacks, therefore robust cybersecurity measures will be essential to protect sensitive data. Further, having one mode of payment will likely pose challenges due to the large premium volumes per transaction.
In order to stymie some of the challenges related to implementation and capitalise on this emerging opportunity, insurance companies will need to implement a number of actions. These include developing Application Programming Interfaces (APIs) to connect their systems with the approved mobile money platforms for seamless data exchange.
They will also need to upgrade their existing IT infrastructure to handle the increased volume of transactions and ensure data security, as well as train their staff on the new procedures and the use of the integrated platforms. Insurance firms also need to educate their customers and the public about the new requirements, as importers who do not comply will not receive customs clearance from the Kenya Revenue Authority.
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