Rising hospital costs sink insurers deeper into losses

Health insurers deepened losses by 22 per cent last year compared to the previous year, on the back of surging claims arising from high medical costs.
The industry’s losses rose to Sh645 million from Sh529 million in 2010, almost twice the Sh239 million made in 2009.

The claims grew to Sh5.4 billion in 2011 from Sh4.8 billion in 2010 as gross premiums increased to Sh8 billion from Sh7.4 billion. Medical insurers are blaming the high claims on fraud.

“The two main causes are sky-high costs of healthcare and fraud of impersonation especially where there are no proper checks by service providers,” said Mr Tom Gichuhi, the chief executive of the Association of Kenya Insurers (AKI).

Jubilee and General Accident Insurance companies were the only major insurers that posted profits of Sh114.9 million and Sh30.8 million respectively.

Heritage Insurance was the biggest loser, posting a loss of Sh219.6 million with Madison recording Sh106 million in losses. APA and Kenindia followed with a loss of Sh95 million and Sh92 million respectively.

Insurance service providers have come under pressure from rising claims that have made them to invest in other revenue streams such as the stock market and real estate projects to protect their margins.

The CEO of Cooperative Insurance Nelson Kuria blamed the losses on insensitive stakeholders in the industry who keep increasing prices and failing to co-operate with insurers to reduce fraud.

“There is no inherent motivation on the part of the service providers to co-operate and solve the problem, the medical businesses has replaced motor insurance in loss-making,” said Mr Kuria.

Mr Kuria said the business is becoming, unsustainable adding that the immediate measure is to raise premiums which are already high. The insurers say that the high costs of healthcare will eventually reduce the pool of clients for the business and hurt the providers.

Staff costs, including doctors’ fees, have also been increased in recent months as specialised human talent becomes the most sought-after resource and a spur for market-share growth.

The CEO of Gertrude’s Children’s Hospital Gordon Ondundo yesterday said the hospital plans to increase the salaries of its doctors this month, pending approval by the board.

He denied claims that Gertrude had barred doctors from joining the union on fears of being coerced to raise salaries. “We had not denied our doctors entry into to the union; we want this (review) to be done through the Kenya Association of Hospitals,” he said.

Consultants at AON Kenya said that part of the high claims is coming from lifestyle diseases such as diabetes and cancer which are on the increase.
“There is also increased healthcare-seeking behaviour among Kenyans most of which is driven by doctors,” said Patrick Kamunyo, director healthcare division at AON Kenya.

There is also newer evidence-based treatment such as the use of MRI scans instead of X-ray which even though recommended is very expensive.

rotini@ke.nationmedia.com