Money Markets
Insurers feel the pinch of downturn as people drop covers to stay afloat
Mr Olende: “Claims are going through the roof and are being fuelled by rising cases of fraud .” Photo/FREDRICK ONYANGO
Insurance companies are facing difficult times with poor generation of premiums thanks to the economic downturn that has shifted spending priorities.
This is coupled by rising fraudulent claims, which eat into their bottom line.
Players that even in the best of time have challenges generating premiums are facing strong headwinds from the soft economy.
“The insurance industry is limping due to the financial crisis as the rising cost of living pushes people to drop their covers,” said Japh Olende, the managing director of Chartis Insurance, formerly AIG Kenya Insurance.
Bigger discount
Mr Olende said fraudulent claims continue to eat into insurance bottom line.
The rising claims especially motor vehicle related are partly attributed to collusion between the police and car owners.
Beside bargaining bigger discount, Mr Olende says that corporate businesses are only renewing covers which are necessary as they try to spend cautiously.
The tougher environment adds up to the rising claims, presence of too many players in the industry chasing small business and a stifling business operating environment.
The industry has 42 licensed players, a situation described by observers as “too crowded” for the business it generates.
Insurers have faced a difficult terrain where potential takers of covers remain cautious, saying the companies were promising what they could not deliver at the time of compensation.
Kenya’s total insurance penetration percentage of GDP for 2008, according to the Association of Kenya insurers (AKI), is a paltry 2.63.
Half of the licensees are involved in general insurance business, seven providing long term businesses while fifteen are composite.
Escalating costs
The industry has also 141 insurance brokers and 19 medical insurance providers or health management organisations.
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