An increase in prices would make insurance more expensive in a market that is struggling to grow penetration from 2.34 per cent—the lowest in over 16 years—that was posted in 2019.
The new rates will be determined for selected classes of insurance as the regulator seeks to strike a balance between affordability of the covers and stability of underwriting companies.
The Insurance Regulatory Authority (IRA) is seeking to review the current premium rates, signalling a fresh push to increase the cost of underwriting in an industry facing price undercutting and breach in capital levels.
An increase in prices would make insurance more expensive in a market that is struggling to grow penetration from 2.34 per cent—the lowest in over 16 years—that was posted in 2019.
The new rates will be determined for selected classes of insurance as the regulator seeks to strike a balance between affordability of the covers and stability of underwriting companies.
IRA has opened search for a consultant to recommend changes to the current methods used in calculating premiums paid by customers in general insurance that covers motor vehicle, personal accident, fire and health.
The regulator reckons that the current rates and risk classification face challenges such as low transparency and arbitrary pricing, even as concerns about availability and affordability of insurance products persist.
“The current rate pricing and risk classification faces some significant challenges. Besides a competitive market environment, various risk-rating factors commonly used are being questioned,” says IRA.
“This assignment, therefore aims to analyse current premium rating practices in the insurance industry in Kenya and the competitiveness of the rates filed at IRA based on risk classification.”
The review comes on the back of IRA having said in October last year that 20 insurance companies or 35 per cent of 56 licensed businesses were facing capital shortfall.
The selected consultant will be required to provide guidance on appropriate flexi-premium rating and banding for various classes of general insurance business.
The premiums suggested will, however have to show what will be the likely impacts on capital ratios of insurers and the affordability for customers.
IRA wants insurers to pick risk-rating factors that can be accurately determined and also earn customer acceptance without leading to the collapse of companies.
Part of the changes will be to deepen the use of customer-oriented premium rating, meaning that the risk profile of each customer will be heavily relied on in picking the monthly premiums.
“Premium rating should be based on the comprehensive knowledge of individual customer’s needs and to design from this knowledge product for the respective target group,” says IRA.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
