CIC General boss Fred Ruoro on weathering climate storms and insuring vehicles profitably

He also delves into the strategy of making motor insurance affordable to customers and profitable to CIC as well as the relief that the shilling has brought to the sector by posting gains against the dollar.

Given the floods and anti-tax protests that rocked the country for the better part of the year, what did you make of 2024 in terms of running the general insurance business?

The year 2024 has been very eventful. We started on a very slow note, given that it was a very dry season last year. We were all worried if we were going to get enough rain. Then sometime in April, we started getting more rain than we had bargained for.

For insurance companies, that meant increased claims. Most of the homes you saw people entering using canoes, the factories in Industrial Area which were flooded and the crops that were flooded, caused losses. As CIC, we have had to pay claims in excess of Sh300 million.

No sooner had the bad weather ended than anti-Finance Bill [2024] protests set in. Again, many of our customers were affected in a very big way.

Some of our large customers, their shops were raided, vehicles were burnt or vandalised and we lost a lot of money again. We saw a very significant surge in claims. Close to Sh400 million worth of claims have been paid.

We are now closing the year with the government’s rollout of social health insurance. Government wants more people to get their medical bills paid by the State. We are a big player in health insurance and so that is an area we are following closely.

But it has not been all doom for the insurers, I suppose…

Sure. You know, when people go through these kinds of misfortunes, they start thinking: ‘How could I have protected myself?’ So a lot more people now are buying insurance than they were before. So it is not necessarily a bad outcome.

Looking at the millions of shillings CIC paid as claims, what kind of conversations are you having when it comes to pricing climate-change related risks and political risks?

Even before talking about pricing, we need to talk about risk management. How do you ensure that the farmers are aware? Because in agriculture, what we are seeing swings between droughts and floods, and this is driven by climate change.

So what we are doing right now is collecting more data and anticipating these perils and also expanding coverage. The big risk happens when you are concentrated in one area. We are looking at a wider scope in terms of farmers trying to ensure that there is a spread and the farmers we insure are not concentrated in one place.

The other thing is about protection for ourselves, because some of these claims, we recover them from our reinsurers. We have to ensure that we have very robust re-insurance arrangements to ensure that we are not necessarily bearing that full burden on our profit and loss account.

Of course, if the trend continues, where we see flooding happening more frequently than now, then that will be a material change and we may need to revisit our pricing or our risk management and mitigation controls. However, at this point, I wouldn't say that we are running to adjust pricing.

Motor vehicle insurance brings in the most premiums for general insurers but it is also the biggest on underwriting losses for most of the insurers. What is CIC doing differently to buck the trend?

For us we have put many interventions to ensure that the motor insurance book we have is sustainable. And that starts with bringing all the stakeholders in the motor insurance value chain together.

We believe that by being more operationally efficient and conducting effective stakeholder engagement, we can contribute to the success of the motor book.

What we have realised is that the cost of repairs is a function of the garage and that is why we are bringing garage operators into the picture and dealing with them as stakeholders as opposed to just people who repair vehicles.

We work with select garages. We do not work with every garage in town. If you are a bit loose on the management of the garages, that is when you give opportunities for fraud.

On the other hand, many customers are struggling with paying premiums. That is why we recently came up with Easy Bima solution. Because of this, instead of customers paying premiums on annual basis, the regulator [Insurance Regulatory Authority] approved us to collect that premium in installments.

So it means somebody can pay the insurance premium the same time they pay their rent. They don’t have to go take a loan to buy insurance.

Many of our customers are appreciating this flexibility. What we are noticing is that the number of customers who are buying on a monthly basis has increased. We plan to put home insurance and a few other products on Easy Bima in the near future.

We also realised that many garages, because of cash flow issues, have to borrow money to repair vehicles. And that was because once they bring the invoices to an insurance company, it takes a bit of time to be paid. But right now, we are paying them within 10 days of bringing the invoice.

The Insurance Act requires upfront payment of premiums for insurers to recognise covers. How does this model of flexible premium payments fit in?

It is true that the Act says premiums should be paid up front. But for CIC, we have a written approval from Insurance Regulatory Authority (IRA) to collect the premium in installments.

We had to engage the IRA and that took a bit of time to justify to them how we will manage the risk and how it will serve our customers. So we have the approval for the installment payment plan. If a risk crystallises before full premium payment, one has to pay the balance for us to honour the claim.

After weakening by about 25 percent against the dollar in 2023, the shilling has this year pulled a decent gain. What size of relief are you seeing especially on the cost of spare parts and medical equipment?

I wouldn't say the relief has been significant. Suppliers are usually very quick to adjust the prices upward but when the prices are coming down, they argue that they still have stock which they had bought at the higher exchange rate, which they need to clear.

Given that a lot of hospital inputs, including the drugs, equipment and disposables are imported, hospitals revised upwards their cost of goods when the shilling was weakening. But we have not received a commensurate communication saying ‘We are lowering the costs because the shilling has gained.’

There is a time lag between the strengthening of the shilling and them adjusting the prices down. So I wouldn't say we have accrued the full benefit, both from hospitals and from garage perspective, but we are seeing movement in a favourable direction.

CIC set up a micro-insurance company this year. What is the plan here?

We have actually gotten the license from the regulator and we now have a very huge portfolio of micro insurance customers, worth about Sh400 million.

Going forward, we are going to engage farmers aggressively, especially leveraging the cooperative movement. We want to work with cooperatives to de-risk some of these emerging exposures like climate change. We want to play big in the micro-insurance space.

When you look at 2025, what do you see shaping the industry?

I see customers becoming a bit more sensitive on who they are insuring with. This year, we have seen many insurance companies struggling with paying claims.

Customers are starting to reflect on the quality of the insurance companies. So I expect well-run insurance companies to get more business because people want security.