New Insurance Act 2009

Introduction:

The regulation of Insurance Market in Tanzania existed since its liberalization of the Industry in year 1996. The Insurance Act Cap 394 of year 1996 was a product of economic and financial sector liberalization carried out by the government of Tanzania from the second half of 1980s to date. The wind of change did not spare the insurance sector, hence in year 1996 a new insurance Act was enacted of which section 5 provided for establishment of an agency of

the government known as Insurance Supervisory Department (ISD). The need to have regulatory framework was born due to opening up of the insurance market for private players contrary to the previous era when there was only NIC in mainland and ZIC in Island. The main objectives of ISD, among others, were to provide superintendence of the conduct of insurers, brokers and agents; formulate standards in the conduct of the business and afford guidance to the players. As time passed, the Act fell short of expectations of the market therefore calling for its review.

The process of enacting the new Act commenced in year 2007 and continued up to April 2009 when the National Assembly unanimously passed it and His excellence the President ascended on May hence the new law came into effect on July 1, 2009. The declaration of the effective date of the new Act was done through the Government Notice No. 266 Published on 24th July 2009, which section 2 read as follows:

“The 1st day of July, 2009 is hereby appointed to be the date on which the Insurance Act, 2009 shall come into operation”

From the above declaration, it means the Insurance Act Cap 394 enacted in year 1996 was repealed and the new Insurance Act 2009 came into force. However it must be noted that the repealed law set structures where different officers were appointed to function. As such Section 168 (2) restores those structures and appointed or employed officers as if they are appointed or employed under the new legislation.

Salient features of the new Act:

The new Insurance Law is among the best insurance legislations in Africa. This fact may be attested to by looking through the salient features of the Act which are as follows:

Main features of the Act:

• The new Act is establishing an Independent Regulatory Authority known as “Tanzania Insurance Regulatory Authority” departing totally from the previous Act which established an agency of the government known as an Insurance Supervisory Department. The Authority will operate independently as per the requirements of the core principles of insurance supervision formulated by the

International Association of Insurance Supervisors (IAIS). The main objectives of the Authority and its functions are provided under section 6 of the Act, which include Promotion and maintenance of efficient, fair, safe and stable insurance market for the benefit and protection of insurance policyholders. (See sections 5 & 6 of the Act)

• The appointment of the Commissioner and Deputy Commissioner were previously being made by the Minister. The new Act prescribes that the two shall be appointed by the President. Their qualifications are also given as possession of adequate knowledge and experience in Insurance Industry. (Sections 7 & 8 of the Act).

• The role of the National Insurance Board is now more of a functional nature than it was previously. This is to ensure that there is good governance in the Authority as far as oversight exercise of the Board is concerned. Section 14 of the Act provide core functions of the Board to include, provision of guidance to

the Authority Generally in the supervision of insurance business in the country and to ensure that the Authority undertakes its activities in a competent manner.

• Even the composition of the Board membership has changed as per section 13 (2), which the coming new Board will include professionals from the industry or related sectors and other recognised institutions which are related to the insurance sector, contrary to the previous membership structure.

The following are completely new features of the new Act:

• Establishment of a special insurance tribunal, technically known as Ombudsman services. (See section 122) The main function of this institution is to resolve disputes arising between policyholders and insurers on the contracts of insurance. (See section 124). The Insurance Ombudsman will function as a quasi- court under a very senior legal practitioner like a retired judge of the High court of Tanzania and alike. The whole of Part ix (a) of the Act deals with Ombudsman services.

• Establishment of an Appeals Tribunal which is a body to deal with all appeals against the decision of the Commissioner of Insurance which affect Insurers, Brokers and Agents. (See section 126 of the Act). Any aggrieved person from the decision of the Commissioner may appeal to the Tribunal. Under the repealed law such appeals would go to the Minister responsible for Finance.

• The right to declare a “Bad faith claim” against Insurance Company if same fails to settle a claim within a statutory time limit of 45 days after admitting liability. Also when liability under normal circumstances is supposed to be admitted but an insurer refuses to do so. Section 131 (3) define the term bad faith claim and its consequences. This is also a new feature which never existed before.

• The new law also provides guidance to the Management of the Authority on the use of funds appropriated by Parliament or from levies or any sum of money which the board may borrow. (See part x of the Act).

• Offences and Penalties as covered in Part xii of the Act. The new law is clearer on the issue of Penalties and Prosecution of offenders of the insurance industry. The Commissioner of Insurance is mandated to prosecute offenders of Insurance in a court of law upon receipt of consent from the Director of Public Prosecution (DPP) (See Section 164). Also the offenders have been given alternative to pay fine as will be prescribed by the Commissioner. If they refuse then they will face criminal charges in a court of law.

• The new Law also gives the Commissioner the right to issue a cease and desist order to the Insurance registrant where in the opinion of the Commissioner a person registered to conduct insurance business is conducting business in an unlawful or unethical manner. (See section 165 (i))

• Apart from imposing an overall duty of care of Directors and Officers to policyholders, the new law also provides for consultation before any changes to regulations are proposed to the government. Other features of the law are like a requirement for an insurer to establish audit and investment committees, placing of additional duties for auditors, definition of related party transactions and the requirement that actuarial valuation of a Non life fund shall be carried out after every two years.

In conclusion, it must be noted that changes that are effected in the insurance market of Tanzania with the operation of a new Insurance law are quite pertinent and are geared towards aligning the market insurance practice with best International practice as provided under core principles of the International Association of Insurance Supervisors (IAIS).

PRESENTATION MADE TO THE BOARD MEMBERS ON 26TH AUGUST 2009


By PAUL JOEL . NGWEMBE


DIRECTOR OF LEGAL SERVICES