Motor and medical claims dominate insurance payouts

Insurance premiums hit Sh309.8 billion last year.

In Summary

•Under general insurance, insurers reported claims incurred went up to Sh77.64 billion last year.

•The rise in claims hence points to higher medical bills, road accidents, theft, fire among other risks that underwriters take to cushion policyholders from losses.

A wreckage of Tahmeed bus that was involved in accident.
A wreckage of Tahmeed bus that was involved in accident.

Insurance claims in Kenya rose by 11.2 per cent last year, latest industry data shows, as underwriters continued to record losses in the motor and medical segments.

The industry paid Sh72.26 billion in claims under general insurance in quarter four of 2022.

According to the Insurance Regulatory Authority (IRA) quarterly report, this marked aa 12.9 per cent increase compared to Sh64 billion  in Q4 2021.

This was about 93.1 per cent of the reported claims under the segment, which went up to Sh77.64 billion, from Sh70.14 billion reported in the fourth quarter of the previous year.

Medical, motor private and motor commercial had the highest amounts of paid claims at 43.5 per cent, 24.9 per cent and 21.9 per cent respectively, of total industry paid claims under general insurance business.

General insurance is a non-life insurance policy that covers homes, travel, vehicle, and health (non-life assets) from fire, floods, accidents, man-made disasters, and theft.

The rise in claims points at higher medical bills, road accidents, theft, fire among other risks.

While some business segments remained in losses, albeit reduced margins, industry registered good business as premiums hit a high of Sh309.8 billion, which is surpassed pre-Covid levels Sh228.8 billion, registered in 2019.

Last year’s performance was also an increase of 12.2 per cent from Sh276.06 billion in Q4 2021.

“The growth is attributed to the continued economic recovery from the negative effect of Covid-19 in 2020 and 2021,” IRA notes.

During the period under review, long term insurance business premiums grew by 13.8 per cent to Sh 140.84 billion, compared to Sh123.71 billion in 2021.

Deposit Administration and Life Assurance classes remained the biggest contributors to the long-term insurance business accounting for 35.9 per cent and 25.2 per cent, respectively.

The class recorded net premium income of Sh128.78 billion representing an increase of 11.9 per cent from Sh115.06 billion reported by the end of Q4 2021.

In the period under review, general insurance premiums amounted to Sh168.92 billion with medical and motor insurance classes maintaining a leading position in terms of contribution at 32.5 per cent and 31.9 per cent, respectively.

“Personal Accident and miscellaneous classes are the only classes whose premiums decreased by 2.5 per cent d 12.4 per cent respectively,” IRA notes in its latest quarterly report.

During the period under review, the sector saw losses in general insurance business underwriting reduce from Sh6.34 billion in Q4 2021, to a loss of Sh3.72 billion in Q4 2022.

Workmen’s compensation class made the highest underwriting profit of Sh2.61 billion while motor private, motor commercial and medical classes incurred the highest underwriting losses of Sh4.04 billion, Sh3.54 billion and Sh726.94 million, respectively.

Meanwhile, the new leadership at IRA has renewed efforts on tackling insurance fraud, consumer protection and premium undercutting by underwriters, even as it seeks to increase insurance penetration in the country.

Former Bumula MP Moses Mabonga who took over the chairmanship at the state corporation in February, is banking on ICT to improve consumer trust and drive growth in the industry.

Penetration is at a low of 2.43 per cent, despite Kenya leading in the region on uptake of insurance.

It is followed by Rwanda with a 1.70 per cent penetration, Uganda (0.84 per cent), Burundi (0.77 per cent) while Tanzania has a 0.53 per cent penetration.

Insurance penetration in Africa is at 0.3 per cent.

Fraudulent motor accident (injury) claims, theft and stealing by agents, and obtaining by false pretence are among reported cases, according to IRA data.

Last year, a total 38 insurance fraud cases were reported to the Insurance Fraud Investigation Unit (IFIU) with forgery of motor insurance certificates leading.

Premium undercutting by firms in a race to protect their market share is also a major challenge, with the trend blamed for the underwriting losses in the industry.

This is on the back of the increased claims, which continue to pile pressure on insurers, despite an improving business environment in the post-pandemic era.

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