Alexander Forbes to offer medical cover for retirees

Financial services provider Alexander Forbes is set to offer medical insurance to retirees who are normally left out by insurance firms.

The pension fund manager will allow employees aged below 60 to save towards a medical cover dubbed Ngao Milele which will kick in when they retire.

Alexander Forbes, which disclosed it had reached an agreement with two underwriters to cover the elderly without exclusion, will withdraw cash from the accumulated fund to pay monthly premiums.

“Only a handful of employers in Kenya currently facilitate post-retirement medical provision for their employees — most retirees guzzle up their savings on medical expenses and housing needs, therefore this new scheme should enable them to plan wisely to avoid desperation in their sunset years,” said Alexander Forbes’ chief executive Sundeep Raichura.

Ngao Milele will provide both in-patient and out-patient covers. Insurance companies have avoided covering the elderly due to the high risk as they are more vulnerable to diseases.

“Individual schemes end at some age, most are up to age 75, they are withdrawn when needed most as the risk is very high. Its only NHIF (National Health Insurance Fund) which continues throughout,” said Isaac Ngaru, an insurance sector consultant.

Alexander Forbes called for the contributions towards post-retirement medical cover to be tax-exempt so as to boost uptake. Contributions towards retirement of up to 20 per cent of one’s pay are tax exempt.

Medical costs have shot up in the recent past due to rising inflation and the rise in cases of chronic diseases such as cancer.

The savings will earn an investment return, albeit at a lower rate than cash set aside under the retirement package.

READ: NHIF plans fund for cancer, diabetes patients

Employers have the option of contributing for their staff and joining an umbrella scheme or launching their individual schemes.

A group of five people qualifies to join the scheme, opening the door for employees whose employers are not ready to contribute to pool funds and contribute. An umbrella cover enjoys better discounts and more flexible terms such as admission of pre-existing conditions.

Contract workers also qualify to join the fund. Those laid off will not face any penalty, but resignations which are not preceded by a three-month notice will be penalised.

The level and structure of the contributions will be tailored to meet the needs of each employers’ workforce. The product runs ahead of Kenya’s regulatory framework as it falls between the realm of the Retirement Benefits Authority and the Insurance Regulatory Authority.

“RBA has said their mandate does not extend to post-retirement medical schemes but we have submitted to them that we want to be voluntary, regulated by them and at the point of contracting an insurer IRA,” said Mr Raichura.

Alexander Forbes said the fund will be managed by a board of trustees and will have independent custodians and fund managers to ensure transparency and stability.

It is estimated that 60 per cent of medical bills occur after retirement. Four out of every five employers polled by Alexander Forbes said they would take up the product for their staff. Most Kenyans rely on contributions from family and friends to clear hospital bills.