Government Launches Crackdown on Non-Compliant PSV Insurers

The Kenyan government has initiated an intensified crackdown on rogue insurance companies accused of exploiting public service vehicle (PSV) operators. This move follows numerous complaints of insurers failing to remit premiums or settle legitimate claims, leaving PSV owners and accident victims vulnerable. The Insurance Regulatory Authority (IRA) confirmed this action during an appearance before the National Assembly Public Petitions Committee on Wednesday, October 15, 2025.

IRA Chief Executive Officer Godfrey Kiptum stated that the Authority has identified several non-compliant insurers that will face regulatory action. This development comes in response to a public petition filed by Machakos MP Caleb Mule, who accused the regulator of insufficient protection for PSV operators against exploitative insurance providers.

Historical Context and Regulatory Challenges

The PSV insurance sector in Kenya has long been plagued by challenges, including high-risk perceptions, fraudulent claims, and unsustainable premium undercutting. Historically, many PSV insurers have faced collapse or statutory management due to these issues. The sector is considered high-risk, making it difficult for insurers to offer sustainable premium rates.

During the committee meeting, chaired by Turbo MP Janet Sitienei, questions were raised regarding why insurers continued to collect premiums despite a consistent failure to pay valid claims. Mr. Kiptum clarified that only three companies are currently licensed to transact PSV insurance in Kenya. PSV insurance primarily covers third-party liabilities such as death, permanent disability, and medical expenses resulting from road accidents, but it does not extend to damage to the vehicle itself or its owner.

Legal Framework and Governance

The Insurance Act (Cap 487) is the primary legislation governing the insurance industry in Kenya, establishing the framework for licensing, operations, supervision, and regulation. The IRA's mandate includes licensing, supervision, and regulation of insurers, reinsurers, brokers, and other intermediaries, with a core focus on consumer protection and market stability.

The government is working to revise the country's insurance law to empower the regulator further and increase accountability, including imposing penalties on directors and management of insurers who mismanage companies. This aims to strengthen governance and ensure prompt claim settlements.

Stakeholder Concerns and Testimonies

PSV operators have consistently voiced complaints about delayed or denied claims. The Federation of Public Transport Sector (FPTS) and the Association of Kenya Insurers (AKI) have both acknowledged the inadequacy of the current PSV insurance framework, calling for urgent reforms. Issues such as widespread fraud, unsustainable premium undercutting, and a lack of digital infrastructure to track claims have been highlighted as crippling the sector.

In the year leading up to June 2023, the insurance sector accounted for 60% of abuse of buyer power cases investigated by the Competition Authority of Kenya (CAK), with delayed payments being a significant concern. The IRA has also noted challenges in obtaining information from insurers regarding claim settlements, hindering investigations into complaints against advocates accused of withholding compensation.

Evidence and Data

• Licensed PSV Insurers: Only three companies are currently licensed by the IRA to transact PSV insurance in Kenya.
• Consumer Complaints: The IRA has received numerous complaints from PSV operators regarding delayed or denied claims.
• Fraud Cases: In the first half of 2025, the Insurance Fraud Investigation Unit (IFIU) received 85 reports of fraudulent claims, with 45 involving motor insurance. Over the past five years, 971 cases of insurance fraud have been reported, with motor vehicle insurance being the most targeted sector.
• Regulatory Proposals: The IRA has proposed raising the maximum payout from the Policyholders Compensation Fund (PCF) to KES 500,000, up from KES 250,000, to boost consumer trust.

Risks and Implications

The exploitation of PSV operators by rogue insurers poses significant financial risks to individuals and businesses in the public transport sector. It also undermines public trust in the insurance industry and can leave accident victims without due compensation. The high-risk nature of PSV insurance, coupled with fraudulent activities, contributes to higher premiums for compliant operators.

Unanswered Questions and Controversies

While the IRA has assured lawmakers of measures to enhance compliance, the specific details of the regulatory actions against identified non-compliant insurers remain to be fully disclosed. The long-standing issues of fraud and delayed claims settlement suggest a need for continuous and robust enforcement mechanisms. The effectiveness of proposed legislative amendments in addressing these systemic challenges will be crucial.

Timeline and Next Steps

The crackdown is currently underway, with the IRA committed to taking action against non-compliant insurers. The National Assembly Public Petitions Committee will likely continue its oversight role to ensure the protection of PSV operators and the public. Ongoing efforts to amend the Insurance Act are expected to provide the regulator with more punitive authority.

What to Watch

Stakeholders should monitor the specific regulatory actions taken by the IRA against identified rogue insurers and the impact of these actions on the PSV insurance market. The progress of proposed amendments to the Insurance Act and their implementation will be key to fostering a more transparent and accountable insurance sector in Kenya. Additionally, the effectiveness of enhanced consumer protection measures, such as the proposed increase in PCF payouts, will be important to observe.