I recently reviewed the insurance industry performance report for quarter two of 2018 by the Insurance Regulatory Authority (IRA) and certain issues stood out.
Growth of general insurance has declined by 1.8 percent, representing a drop of over Sh900 million. General insurance business should not be experiencing a negative growth in premiums. The quarter result shows that the category is heavily reliant on Third Party statutory insurance cover.
And it’s easy to see why with data showing that there’s poor claims payment, which essentially makes the public shun insurance products. Claims payment is the most important parameter by which the public weighs investment decisions. No one wants to insure and not get paid.
Long -term insurance business continues to stagnate, growing premiums by a paltry 0.7 percent (only Sh278m ) compared to the same period last year.
At the same period commission payment income declined by Sh443m, a drop of some 17.4 percent. This fall has been steady for the last three years, but this year has seen the worst lack of payment of commissions to insurance agents. The biggest question is, where do agents’ commissions go to, and why is the regulator not on top of his game to tame this ‘thievery’ of commissions by insurance companies?
Unlike general insurance business, uptake of long-term insurance is wholly driven by insurance agents and the only motivator is commissions. There’s almost no walk-ins for long-term business. Where the commissions are not being paid, is it any wonder that that class of business has almost stagnated in growth.
In a developed insurance industry, long-term business almost surpasses general insurance. The reverse is the same in this country. Long -term business growth continues to plummet and it’s not rocket science to see the reason why.
Most of the profits projected by insurance companies would not be so if a proper audit of the figures was done. It would show discrepancies in expenses such as commission payments and serious audit queries would have to be raised as to why they have not been paid out to the rightful owners. Is it too much to ask the regulator to intervene and have the millions go to the rightful owners?
Medical insurance business continues to grow by a big margin and this can only be attributed to the governments marketing of the same with health being priority item by this government. This marketing has trickled to the insurance industry and seen medical insurance grow by 5.7 percent, and have a distribution of 32 percent among the general insurance class, the highest by far of any other product in that category.
Marine insurance continues to lag in growth despite the government’s directive in January 2017 that all imports and exports be insured locally. The production done so far is only Sh2 billion, but we should be having figures of over Sh15 billion by now, according to earlier projections. As stakeholders we complained then, during its introduction, that the way it was being implemented would not lead to substantial growth and our predictions have turned reality.
There’s also fear of capacity for marine insurance despite the industry saying they can meet any claim. Of course they have not convinced a majority of the business men.
Washington Ndegea, Chairman, Bima Intermediaries Association of Kenya.