How Jubilee survived 2018 insurance industry losses

Jubilee Holdings #ticker:JUB sees a better 2019 despite the insurance sector having been through a very challenging period last year.

A third of insurance companies plunged to a combined pre-tax loss of Sh8.5 billion, hurt by high costs and a bearish Nairobi Securities Exchange (NSE) and other factors that conspired to sink the sector in a 68 percent dip in profitability last year.

The Business Daily spoke to Jubilee Holdings chairman Nizar Juma on the challenges that faced the industry last year and what can be done to turn around 2019 performance.

YOU HAVE DESCRIBED 2018 AS ONE OF THE WORST YEARS FOR THE INSURANCE SECTOR IN KENYA. WHAT LED TO THE DECLINED EARNINGS?

Price undercutting, fraud and poor underwriting practices have caught up with the industry. The Insurance Regulatory Authority used to have guidelines on premiums but the Competition Authority of Kenya told it to stop.

Now everybody is competing for top line and price undercutting is becoming a big challenge.

Many insurers don’t understand that top-line without bottom-line is useless. Expenses for many of the firms have gone up, putting pressure on profits.

Fraud has also gone high especially in medical insurance.

For instance, the World Health Organisation statistics show that 23 per cent of women in the world deliver through Caesarian-section but for Kenya, it is about 50 per cent.

Costs keep escalating and that is why 12 out 21 insurers made underwriting losses. Insurers may have to increase premiums.

WHAT DO YOU MAKE OF JUBILEE’S PERFORMANCE IN SUCH AN ENVIRONMENT?

We recorded growth in gross written premiums against a market backdrop of deteriorating industry’performance due to a number of factors, including declining investment returns.

We posted a strong performance despite the challenges in the industry and declared combined interim and final dividend of Sh8.00 per share.

Our growth in Uganda and Tanzania strengthened our market leadership and demonstrated business resilience. We had the lowest expense ratio in the industry and our conservative approach to investments allowed us to post strong results.

FOR MANY INSURERS, A DIP AT THE NAIROBI SECURITIES EXCHANGE (NSE) MEANS A DIP IN INVESTMENT INCOME AND EVENTUALLY A DROP IN PROFITS. HOW DOES JUBILEE MITIGATE AGAINST THIS?

We took a decision about five years ago to cut our exposure at NSE gradually. Each year, we have been bringing our exposure down and putting more of our money in government bonds. We also went into other government guaranteed investments to get return in dollar terms.

We further diversified by investing in a number of quality companies. Last year, we took a hit when the NSE went down by about 30 per cent but our hit was quite small compared to other players.

We have been following this conservative attitude and still maintained a descent profit and dividend payout.

WHAT HAS BEEN THE IMPACT OF SPLITTING JUBILEE INSURANCE KENYA SUBSIDIARY INTO THREE SEPARATE COMPANIES?

Last year, the board approved the split of the Kenyan subsidiary into three separate companies specialising in medical, general and life businesses. This has helped us to give more attention to each business segment.

This is already a legal requirement in Uganda and Tanzania and we decided to do so in Kenya so that more potential is realised. Each company will have its own CEO and staff.

We believe this way, we will be able to focus much more because each staff will be accountable for their own business rather than hide behind others.

When we did the separation in Uganda and Tanzania, life business shot up because of more attention.

YOU LAUNCHED JULIE THE CHAT BOT AS MORE FOCUS TURNS TO SOCIAL MEDIA SERVICE. ISN’T IT TIME JULIE STARTS SELLING PRODUCTS TOO?

We want to give customers as many platforms as possible so that they engage us.

There is a system that escalates all customer complaints all the way to the top if it misses the turnaround time defined by Jubilee.

Julie has automated simple tasks like giving quotations to customers and this has taken pressure off our customer service team so that it has more time to handle complex enquiries.

CLAIMS SETTLEMENT PERIOD FOR SO MANY INSURERS TEND TO TAKE TOO LONG AND THIS BEATS THE FOUNDATION OF TAKING INSURANCE COVER. WHAT’S THE MISSING LINK?

About half of insurers in Kenya are trying to find ways to avoid paying claims. For us, being listed on the NSE gives our customers additional information to assess our ability to pay claims, based on strength of balance sheet.

Sometimes claims payment delays because of fraud, which takes time to investigate.

Otherwise, we have even put money in electronic claims so that all service providers are directly in connection with our systems.

There is no paper work any more. People get paid within 15 days for as long as no fraud is involved. The e-claims we introduced last year has also helped us cut fraud.

We have put in systems to ensure genuine claims flow through as quickly as possible and is settled. For as long as documentation is provided on time, we follow our promise through.

THE BANKING SECTOR, WITH 42 BANKS SERVING ABOUT 45 MILLION PEOPLE, IS SEEN AS OVERBANKED. WILL YOU SAY THE SAME THING ABOUT INSURANCE FIRMS IN KENYA CONSIDERING THE PENETRATION LEVEL?

Absolutely. To have over 45 insurers for a population of 45 million is crazy. They cannot all survive. There has to be consolidation. When you see results like the ones for this year, the writing is on the wall.