Insurers take hit from Covid as claims remain high

Cancellations hit 87,670 in six months.

In Summary

•Motor private policies recorded the highest number of cancellations at 36,572, followed by motor commercial segment (11,663 policies).

•Covid-19 related claims totaled Sh1.5 billion.

Wreckage of a car at an accident scene
FAKE LUXURY?: Wreckage of a car at an accident scene
Image: FILE

Underwriters in the country are facing increased policy cancellations on one hand and rising claims on the other as Covid-19 continues to slow down the economy.

The insurers are exposed both on balance sheet (liability) because of changes to interest rates, as well as the potential increase in claims and on assets due to market volatility.

A market survey by the Insurance Regulatory Authority(IRA) shows policy cancellations between July and December last year, hit a high of 87,670.

This came as Covid-19 related claims totaled Sh1.5 billion.

Motor private policies recorded the highest number of cancellations at 36,572, followed by motor commercial segment (11,663 policies) while 11,219 polices were canceled in the medical insurance segment.

Other notable cancellations were recorded in personal accident insurance, workmen's compensation, motor vehicle PSV and fire insurance both industrial and domestic.

General insurance companies incurred Sh270 million in compensation, life insurance companies (559.8 million) while group life impacted by Covid-19 saw companies incure Sh368 million in claims.

Companies in medical business incurred claims of up to Sh269 million.

“The authority will remain vigilant in terms of the financial soundness and operational resilience of insurers , in support of the protection of policyholders and the maintenance of financial stability,” IRA notes.

IRA has also been pursuing a range of regulatory and supervisory measures to provide operational relief to insurers in the wake of Covid-19 pandemic, and to provide flexibility to help insurers maintain business soundness, and deliver services to policyholders and the economy.

It is keen to push insurance penetration to above the current 2.43 per cent in a market which has Sh216.26 billion in gross premium income.

There are 56 insurance companies operating in the country, with five re-insurance firms.

Insurance policies (excluding NHIF) are at around 3.4 million with 4.3 million lives covered.

The regulator has in recent times cracked down rogue industry players, mainly fake motor private policies being sold to motorists, reflecting rising fraud on motor insurance.

According to the Association of Kenya Insurers(AKI), fraud cases have increased since digitisation of the insurance policies payment systems.

Currently, a buyer pays, the cover is effected and they get the certificate on email and print, as opposed to the past where one would physically collect the certificate.

This, AKI says this has led to fraudulent deals where some rouge agents and members of the public have been manipulating systems.

Some of the regions with high cases of fraud, according to AKI,  include Kitengela, Kisumu and Nairobi.