Industry

Vehicle insurance pushes payout to eight-year high

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Wreckage of a car at a police station. FILE PHOTO | NMG

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Summary

  • Kenya’s general insurers have posted 63.5 percent incurred claim ratio, the worst in eight years, pointing to deteriorating pricing and claims management, especially for motor insurance.
  • The incurred claim ratio represents the total claims paid from the net premiums collected from customers during the year.
  • The ratio moved from 62.2 percent recorded in the previous year. This was in contrast with 57.2 percent in 2013, which is the best record for the general insurers in the last eight years.

Kenya’s general insurers have posted 63.5 percent incurred claim ratio, the worst in eight years, pointing to deteriorating pricing and claims management, especially for motor insurance.

The incurred claim ratio represents the total claims paid from the net premiums collected from customers during the year.

The ratio moved from 62.2 percent recorded in the previous year. This was in contrast with 57.2 percent in 2013, which is the best record for the general insurers in the last eight years.

More than a quarter (14) of the 37 insurers had incurred claims ratios above the industry average, the Insurance Regulatory Authority (IRA) data for 2019 shows.

“More than half (53 percent) of the incurred claims emanated from the motor business while premium contribution is only 34.7 percent, indicating motor as a high-risk insurance business class,” said the IRA.

Motor private and motor commercial had 77.1 percent and 67.3 percent claim ratios respectively, followed by medical (74.4 percent) and engineering (70.7 percent)

Kenya’s insurance industry is grappling with prevalent cases of price undercutting and fraud, which has made it difficult for the players to post consistent growth in performance.

The market has 56 insurers chasing for business in an economy where insurance penetration is below three per cent, fuelling cut-throat competition.

The high claims ratio saw underwriting loss for general insurers widen by 80 per cent to Sh2.97 billion from a loss of Sh1.65 billion the previous year.

The total claims paid, however, decreased by 1.3 per cent to Sh55.62 billion compared to Sh56.37 billion in 2018. This means claims payout was rising faster than the new premiums collected.

Kenindia had the highest claim ratio at 89.2 percent followed by Kenya Orient (79.8 percent). Others with ratios above 70 per cent were Jubilee, CIC, Fidelity Shield, Madison, and Trident.

A claim ratio nearer 100 percent indicates that a company is paying out more towards claims when compared with the amount of premiums it earns.

A ratio of less than 100 percent implies that an insurer is more profitable and therefore better placed to pay future claims raised by the insured people.