Insurance companies are seeking to limit the amount of money they can pay for each claim arising from the treatment of Covid-19 as the underwriters face the possibility of increased expenses related to the respiratory disease that could push them into losses.
Industry players have been meeting to develop a joint response to the directive by the Insurance Regulatory Authority (IRA) that all Covid-19 claims be settled.
Association of Kenya Insurers (AKI) chief executive Tom Gichuhi said the companies face great uncertainty if they continue to settle open-ended claims. He said a limit on claims must be set at a level that the industry can withstand in what will see the insurers set caps similar to those offered for maternity covers.
“Soon we will be able to tell the public the amount that will be paid per person and the total amount the industry can sustain,” Mr Gichuhi said.
On Friday, IRA confirmed knowledge of the talks, adding that it will issue a policy direction this week after meeting the insurers.
Kenya has confirmed 672 cases of coronavirus out of 32,097 samples with 32 reported deaths and 207 recoveries from the infectious disease that has become a global pandemic.
Mr Gichuhi said life claims from deaths have not been a big issue but medical bills, which can top Sh1 million per person, may be challenging if the numbers are huge and the pandemic persists.
Medical claims contributed the second largest portion of premiums at Sh42.4 billion in the last quarter of 2019 and attracted the largest claims at Sh20.4 billion in the same period.
In Kenya, medical insurance remains a loss-making segment due to price undercutting, fraud and high hospital bills. Medical insurers’ underwriting loss doubled to Sh75 million in 2019.
The decision by the regulator to force insurers to pay for costs arising from the pandemic in full has thrown insurers into uncharted territory. Insurance is based on a model that claims are limited and that only a part of the insured population will suffer the risks covered.
Over the years, insurers have adjusted their claims to “direct and physical loss damages” to avoid the growing threat of pandemics with the increasing occurrence of episodes of viral diseases like Sars and Ebola.
The firms said their insurance policies only give basic cover, with no obligation to pay out in relation to a pandemic like coronavirus of fears of widespread ballooning costs, When the World Health Organisation (WHO) declared the novel coronavirus a pandemic in March 11, AKI said the classification indicated that patients would settle their own bills if cases were reported in Kenya.
Mr Gichuhi said if there was to be widespread infection, then all insurance companies would have close shop because the claims have the potential to wipe out the insurers. He said this was the justification for exclusions put in insurance policies.
Now, IRA seems to have softened its position in the wake of the threat posed by Covid-19 that has forced a review of insurance rules. The regulator has increased the validity of insurance contract for three months where customers faced challenges paying premiums and made it difficult for insurance companies to avoid meeting claims.
The IRA also said late filing of claims or failure to pay premiums will not be used as an excuse to avoid coronavirus-related claims. Further, insurance companies will not be allowed to introduce new product exclusions or change product terms and conditions without approval from the regulator.
That means companies wishing to withdraw some products will have to get approval from the commissioner of insurance.
The regulator said that all claims have to be settled while those facing trouble meeting premiums will be offered three months’ holiday. Industry players say this holiday will be difficult to apply to general insurance since they should not be expected to meet all claims yet they are not getting premiums.
“Renewal of policies is coming up and the regulator should be clear on the premise of the holiday and what happens if claims arise,” an insurance manager said on condition of anonymity.
Kenya has ten broad categories of general insurance, including motor, medical, fire, aviation, engineering, liability, marine, personal accident, theft and workman’s compensation with high claims which saw an underwriting loss of Sh2.97 billion in the last quarter of 2019.
The regulator says that companies must submit status reports stating whether they face collapse or have adequate funds to meet claims.