Health insurers in record Sh891m profit on Covid-19


The Association of Kenya Insurers chief executive Tom Gichuhi. PHOTO | SALATON NJAU | NMG

Medical insurers posted their highest-ever underwriting profit in the six months ended June last year on reduced bills, as patients avoided hospitals for fear of contracting the coronavirus.

Latest data by the Insurance Regulatory Authority (IRA) shows that medical insurance firms made Sh891.05 million in underwriting profit over the half-year period— a record performance for the firms which have over the years posted losses.

Tom Gichuhi, the chief executive of the Association of Kenya Insurers (AKI), attributed the performance on substantial reduction in claims payment due to reduced visits to hospitals.

“Many people avoided going to hospitals for fear of contracting Covid-19. There was highly reduced traffic to hospitals and even those seeking elective surgeries were also postponing,” he said.

“People were also working from home and therefore for simple ailments which could otherwise drive heavy traffic to hospitals, people avoided.”

The Sh891.05 million profit was 3.2 times higher than the Sh280.37 million posted in the preceding half year, placing medical insurers on a strong footing to continue with the recovery from the Sh1.1 billon loss they booked in 2018.

Out of the 24 medical insurers, only seven posted underwriting losses, a big improvement from a similar period the previous year when a majority (16) of the firms were in the red.

Kenya Alliance posted Sh202.9 million medical underwriting loss followed by Madison (Sh143.9 million), Takaful (Sh63.85 million), Pacis (Sh17.67 million), ICEA Lion (Sh17.58 million) and Tausi (Sh1.24 million).

Kenya reported the first Covid-19 case on March 13, prompting the State to impose measures such as a dusk-to-dawn curfew, social distancing and work-from-home calls.

Medical claims paid during the six months fell by Sh362 million to Sh9.75 billion, marking the first time in over eight years they didn’t grow.

Reduced hospital visits spared insurers’ huge bills, with official data showing that the cost of healthcare rose sharpest in October due to a surge in Covid-19 infections.

Statistics by the Central Bank of Kenya (CBK) show that health inflation hit an all-time high of 3.04 percent in October from 0.05 percent at the start of last year.

Reduced hospital visits translated to reduced revenues for health facilities, prompting some to implement layoffs and salary cuts amid assurances by health officials that sufficient measures had been taken to lower Covid-19 infections in hospitals.

The government at one point mulled over making it mandatory for patients being admitted to hospitals to be first tested for Covid-19 as a precautionary measure to reduce the risk of infections to healthcare workers.

Medical insurers also closed the review period with the best incurred loss ratio—proportion of collected premiums that were paid out as claims— since the IRA started providing data on the sector.

The incurred claims ratio dropped from 72.6 percent to 69 percent— compared to 83.9 percent seven years ago.

The improved performance in medical cover helped general insurers to rebound from an underwriting loss of Sh1.26 billion in mid-2019 to a profit of Sh62.45 million.

Insurers had raised the alarm about high Covid-19 infections substantially raising medical bills.

However, the muted rise in Covid-19 claims and the limiting of virus covers to patients seeking care in public facilities helped shield insurers from high payouts.

Insurance companies had paid Sh108.2 million on Covid-19 death claims by mid-June last year, according to IRA data.

The regulator said total claims hit Sh109.6 million, including Sh1.45 million paid for general health cover.

Medical insurance is the second-largest class of short term insurance business after motor insurance, in terms of gross written premium.

However, the business has been struggling over the years, with underwriting losses doubling to Sh1.1 billion in the year ended December 2018. Only six medical insures posted a profit then.

Insurers last year suspended Nairobi Women’s Hospital from their list of accredited facilities in light of allegations of cost inflation.

The services were, however, reinstated after insurers reviewed the operations of the hospital and threatened to blacklist any other that would in future be found to be inflating bills.

Medical insurers have also been at loggerheads with hospitals over the number of tests administered to patients, the use of the expensive branded drugs as well as choosing expensive procedures such as Caesarean-Section delivery.

An April 2019 report by Nairobi County Assembly Health Services committee showed that out of the 9,043 health facilities in the city, only 1,079 were registered and licensed to operate.

This means over 3.5 million people living in Kenya’s capital are more likely to seek services from health facilities whose quality is not assured, leading to wrong diagnosis and repeat visits to hospitals.