I have written before on certain tell-tale signs that betray a failing insurer. Another insurer has gone to the dogs. Invesco which was started in the late nineties is barely 10 years old. It has gone the way of the famous Passengers Service Vehicle (PSV) insurers: Stallion, Liberty, Lakestar, and United to name a few. What happened is any one's guess but it is increasingly clear that management problems might play a big role.

INVESCO was doing well until recently, when things took a turn for the worse. If you look at its competitors in the PSV sub sector ( notably Gateway and Standard) which have been doing business longer than INVESCO (Gateway was established in 1982 and Standard in 1993), there seems to be a strong indication that management has almost everything to do with the failure of INVESCO. The question is, how did the two mentioned insurers who were no doubt influenced by the same business environment and external forces, manage to steer clear off the sharks in the business much longer than INVESCO itself?

The answer lies in the management. A close examination of Gateway Insurance Company reveals a tight, conservative (and perhaps risk averse) management style under the former managing Director Godfrey Karuri. Mr. Karuri, now retired, maintained close control of all the procedures and process of the company. He would never entertain any shortcuts and fraudulent activities. On the other hand, close look at Standard Assurance. You will also see a closely watched entity through the current General Manager Elijah Adul. Again as a long serving manager, he has overseen the Company through the industry's lowest moments and therefore has a firm understanding about the possible pitfalls that they ought to steer clear.

So what do we learn from the two PSV Insurance Companies? One is close management control and not leaving everything to junior officers (who are very easy to compromise when it comes to fraudulent claims). Senior management must look closely at how the company is going and not just sign cheques or be influenced by the board of Directors (who are sometimes hostile to the Company they own). Many Directors often get in the way of senior management and want their personal interests upheld in favour of the Company's.

Second is management continuity. This is important in managing and perfecting the daily processes as well as ensuring that a firm tradition is created. Each high-level management change usually brings a different dynamic, which may either be positive or negative. Each manager has his own style and therefore high staff turnover usually works against the insurer. There is also a learning curve for every new manager and this sometimes works against them in that corrupt forces may take advantage of ignorance or unseen loopholes in the system. Invesco, which began in 1998, has undergone many senior management changes with several CEO's coming and going (often leaving in acrimonious circumstances). This interferes with a company's dynamism.

Third, the insurers must pursue a balance of their risk portfolios. It is important to always understand that the aggressive pursuit of one line of business especially the PSV insurance can pile unnecessary pressure on the insurer when it comes to claims. It is therefore important to balance the PSV with other non-motor business and thereby ensure that a heavy claims business line is offset by a low claims business line. Invesco had actually landed the city council account (which is considered a poor risk owing to the way city hall has been run). They paid out well over Kshs. 100 million which might be said to be one of the straws (if not the straw) that eventually broke the Camel's back.

There are many reasons that can be advanced to try and explain the reasons for the failure of Invesco. However, the signs were there for anyone to see, since statutory managers have a very low revival record for insurers (no insurer placed under statutory management has ever been revived). They might as well start preparing the undertakers (receiver managers) for the next phase. Indeed the revenues of the Company were good but the payouts were also crazy. As a result, profits were often low or non - existent. No doubt millions of policy holders are a disappointed lot. The insurance Regulatory Authority should therefore move fast to ensure that the policy holders fund is utilized to settle every  genuine claim that is pending.