More than half of Kenya’s 32 medical insurance firms recorded losses totalling Sh621.64 million last year due to the high cost of healthcare and undercutting of premiums by some insurers, data by the industry regulator showed.
The Insurance Regulatory Authority (IRA) said 20 out of 32 medical insurance companies succumbed to underwriting losses in the financial year ending December 31, 2016.
“The medical class reported escalating losses amounting to Sh 621.64 million, an increase of 427 per cent from 2015,” the regulator said in its newly published industry status report for 2016.
Medical insurance claims increased by 10.2 per cent from Sh49 billion in 2015 to Sh54.8 billion in 2016, mainly because of increased healthcare costs. Several hospitals have adjusted service fees on items such as outpatient consultation fees and bed charges.
Underwriting profits are calculated by deducting claims paid out and administrative expenses incurred to manage a portfolio from the premiums collected. According to the insurance industry regulator, general insurance business recorded an underwriting loss of Sh2.31 billion.
Motor classes of the insurance business and medical dominated the general insurance business segment, constituting 68.2 per cent of the total general insurance premiums, which is 31.7 per cent of medical insurance and 36.5 per cent for motor insurance classes.
According to the report, general insurance business underwriters’ claims last year amounted to Sh54.86 billion, an increase of 11.8 per cent from Sh49.05 billion in 2015.
During the period under review, the combined industry profit before tax decreased by Sh1.3 billion to Sh12.8 billion in 2016 from Sh14.1 billion recorded in 2015.
Insurance penetration also fell to 2.73 per cent last year, compared to 2.83 per cent in 2015, according to the IRA report. This is the lowest since 2014, when the industry’s penetration stood at 2.9 per cent.
“The decline in penetration is attributed to higher nominal growth in gross domestic product (GDP) of 14.3 per cent) compared to nominal growth in gross direct premium of 13.2 per cent, said the industry regulator.
Insurance penetration is defined as a ratio of premium written to gross domestic product (GDP) in a given year for a given country or region.
It is measured by size and spread of the insurance sector, extent of savings in the financial instruments, the level of economic development in the country as well as extent of savings in the financial instruments.
Penetration had also dipped according to IRA, as a result of a faster GDP growth than the insured premium in the year under review.
The industry’s gross written premium as at December 2016 however stood at Sh196.64 billion representing a 13 13 per cent growth from Sh174.06 billion in 2015.