“Motor vehicle insurance business has a very high impact in the insurance industry because of its size. Increase in the cost of premiums was the main contributor to higher penetration,” said Nelson Kuria, the CEO of CIC Insurance Company.
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Rise in the cost of motor vehicle cover and an increase in the number of Kenyans owning private cars helped to improve insurance penetration and industry income in 2010.
Penetration rose from 2.8 per cent in 2009 to 3.1 per cent last year, in what is expected to support the double-digit growth in profits the insurers posted last year.
The change, however, meant that general insurance, unlike the investment-based life policies, remained the key driver of penetration. Industry leaders said the increase in the cost of motor vehicle insurance from maximum of 4.5 per cent of the value of the vehicle to a minimum of 7.5 per cent for first time drivers or those with previous claims were major drivers.
“Motor vehicle insurance business has a very high impact in the insurance industry because of its size.
Increase in the cost of premiums was the main contributor to higher penetration,” said Nelson Kuria, the CEO of CIC Insurance Company.
Penetration represents the proportion of national wealth created in a year spent on insurance.
The 2010 report indicates gross premium for motor private motor vehicle insurance rose by 36 per cent from the previous increase of 19.7 per cent.
The industry’s net profit increased by 79.5 per cent to Sh7.70 billion last year compared to Sh4.29 billion in 2009—which is still low compared to Sh72 billion posted by bankers.
This increase helped the industry grow its gross premium income from Sh64.4 billion in 2009 to Sh79 billion.
The high premiums were introduced under the private motor vehicle business last year to help make private motorists more responsible by offering discounts on renewal of cover if they did not make claims in the previous year.
Consumer organisations opposed the rise, saying the industry was imposing a heavy burden to protect inefficiency linked to inability to fight fraudulent claims.
The increased premiums helped the industry to reduce the loss ratio of the private motor vehicle business from 80 per cent in 2009 to 74.9 per cent in 2010.
The Economic Survey of 2011 says registration of new motor vehicles — saloon cars and station wagons — increased from 44,529 to 53,718.
Health insurance premiums have been growing at a rate of 25 per cent every year in the last few years and the cost will keep rising, say players.
“Medical insurance premiums are bound to go up on renewal and because of increasing cost of medical services,” said Mr Peter Kamunyo, the head of healthcare division at AON Kenya.
