The Kenya Bankers Association (KBA) has urged the High Court to suspend a circular by the Commissioner of Insurance, which banned service-based fees paid by insurance firms to the subsidiaries of commercial banks.
In submissions filed in the High Court, KBA argued that the circular effectively invalidates contractual agreements between bancassurance intermediaries and insurers concerning value-added services.
The circular issued on March 25, 2026, stated that any payments made to intermediaries, such as override commissions, administration fees, profit shares, or any similar payments exceeding the limits set under the Insurance Act, are illegal.
However, KBA, through its chief executive officer, Raimond Malonje, contends that the circular wrongly seeks to outlaw service-based fees for auxiliary services, which are separately contracted between insurers and bancassurance intermediaries.
The association pointed out that these fees are not regulated or governed by the Insurance Act or its regulations.
“The fees in question do not constitute brokerage fees or commissions, and as such, they are not prescribed under the Insurance Act or its related provisions,” KBA stated.
Furthermore, KBA questioned the regulator’s actions, pointing out that the Insurance Commissioner had not specified which regulated entities, including bancassurance intermediaries, were being monitored for compliance or found in violation of the Act.
In response, the Commissioner of Insurance, Godfrey Kiptum, opposed the application, arguing that the circular was issued to streamline practices and ensure that audited accounts were properly submitted.
He said an audit had revealed that some insurers were still paying commissions above the amounts prescribed under the Insurance Act.
“The circular provides that insurers should charge premium rates according to the manual filed with the Authority, and that any payments to intermediaries in the form of override commissions, administration fees, profit shares, or any other similar fees that exceed the prescribed limits under the Insurance Act are illegal. Premiums should be remitted to the insurer in full, not net of commissions,” Mr Kiptum said.
The commissioner warned that granting the conservatory order sought by KBA would expose policyholders’ funds to the risk of dissipation and policyholder interests.