Manufacturers cry foul on insurance premiums spikeMonday January 30 2023
Manufacturers have cried foul over a spike in insurance premiums, warning that some firms will forego coverage due to the hard economic times they’re facing.
Increased insurance premiums have been a major factor affecting manufacturers who seek cover against fire risks, machinery breakdown and industrial risks.
“The adjustment in premiums has come at a time when the sector is grappling with economic recession, coupled with inflation arising from a range of national and global dynamics,” said Bharat Shah, chairperson tax and trade committee at the Kenya Association of Manufacturers.
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“The affordability issue created by this adjustment will have a negative impact on the economy in instances where some entities will forego insurance.”
“Global inflationary pressures have contributed greatly to a rise in insurance premiums. The rise has also been attributed to higher risks,” Godfrey Kiptum, chief executive at the Insurance Regulatory Authority.
The manufacturing sector has been affected by a sharp rise in insurance premiums, particularly against fire risks, machinery breakdown and industrial risks.
The 2022 Economic Survey shows that the manufacturing sector contributes 7.2 per cent to Kenya’s gross domestic product ranking it among the top contributors to Kenya’s economy behind agriculture (22 percent), transport (11 percent), real estate (nine percent) and trade (seven percent).
There are many insurance packages for manufacturers such as workers’ compensation.
The workers’ compensation insurance pays for the medical bills and the time off work for the injured employee.
General liability insurance for manufacturers is the overarching insurance policy that covers bodily injury and property damage one may cause others due to one’s business operations.
A survey conducted by the Insurance Regulatory Authority (IRA) in 2012 on enterprises' perception of insurance in Kenya showed that the main barrier to insurance uptake was affordability or lack of finances.
Twenty-eight per cent of the enterprises sampled then said insurance was expensive while six per cent said there wasn’t enough money to spare for coverage. Seventeen per cent said the business was too young.
Mr Tom Gichuhi, the Executive Director at the Association of Kenya Insurers (AKI) says the decision to increase premiums is not an industry move.
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“It is not a collective approach to premium increase by the entire industry, it is a few insurance companies who may have increased their premiums,” said Mr Gichuhi.
Mr Gichuhi added that because insurance companies also suffer from inflation and other global macroeconomics if they adjusted their premiums nobody would blame them.