Benefits paid out by long term insurance companies shot up 29 percent to Sh39.4 billion in the six months to June due to retrenched workers cashing out their pension dues and claims arising from Covid-19 deaths.
Business closures caused by the pandemic hit several sectors such as tourism and transport, forcing firms to lay off workers who accessed their pension dues, driving up claims and benefits from Sh30 billion in a similar period last year.
The difficult economic environment also led some customers to terminate their policies prematurely, incurring loss of benefits and penalties which can amount to receiving only 45 percent of premiums paid.
There was also an increase in life claims after some policyholders who contracted the virus succumbed to the disease which has killed thousands since last year.
“The hospitality industry saw a lot of closures and some of their schemes were wound up and beneficiaries were paid driving up surrendered claims,” said an insurance executive who did not wish to be named.
Some of the biggest businesses that shut down include Intercontinental Hotel and Fairmont Norfolk as decline in revenues saw hotels shut down operations, axe casual workers and send other employees on unpaid leave while those who remained got salary cuts.
Intercontinental shut down in August last year with the operator and foreign shareholder InterContinental Hotel ending its lease.
The Fairmont Norfolk, an iconic hotel in Nairobi, said it was closing its doors indefinitely and sacked all employees in a row sparked by the pandemic.
The adverse impact of health and economic crisis led to delayed premiums and policy cancellations in the insurance industry.
IRA data shows that last year Kenyans cancelled 87,699 policies out of which 48,235 were car insurance on imposed lockdowns and the need to conserve cash and cut expenses including premium payments.
Generally, the regulator said it noticed a nine percent jump in general business cancellation even as four per cent of life insurance policies lapsed without being renewed.