The insurance industry expanded by 13.4 per cent to hit gross premiums of Sh174 billion last year, but private motor cover made a blot on the sector as it deepened underwriting losses to Sh3.4 billion last year up from Sh3.36 billion in 2015.
The losses were attributed to rampant fraud by private vehicle owners.
According to an annual report released Thursday by the Association of Kenya Insurers (AKI), the rise in private motor insurance losses coincided with a 7.68 per cent growth of the segment to Sh20.4 billion gross written premiums.
Private motor insurance involves protection against accidental loss or damage to vehicles.
The AKI data also shows medical insurers took a hit from the fraud, making an underwriting loss of Sh782 million. “One of the major factors is fraud in the two classes,” said AKI in a statement.
Among insurers who reported the highest losses in the private motor segment include CIC General at Sh496 million, APA (Sh385 million), UAP (Sh339 million) Cannon (Sh311 million) and First Assurance at Sh198 million.
On the medical insurance segment Resolution reported the highest loss at Sh387 million, Madison (Sh264), UAP General (Sh189), First Assurance (Sh132million) and Trident at Sh119 million.
AKI Chairman Patrick Tumbo said a huge chunk of private car owners write off their older vehicles to get new ones or exaggerate repair costs to include wear and tear. “Others commit fraud by selling their cars or through theft,” he said. Some insurers fear the fraud could cripple their operations if unaddressed.
AKI executive director Tom Gichuhi said the lobby is setting up a shared data system to lock out fraudsters.
“Eleven of our members are involved in a test run of the portal. It will be up and running in December,” said Mr Gichuhi adding it would enable insurers share data on fraudsters in order to blacklist them.
Medical losses are mainly tied to inflated costs from the hospitals and clinics and over-prescription of branded drugs instead of prescribing generics, added Mr Tumbo. The industry incurred net claims of Sh86.62 billion in 2016 compared to Sh81.18 billion in 2015, a 6.7 per cent increase.