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Medical insurers post a record 1.3 billion in underwriting profits

Medical insurers in Kenya posted a record Sh1.3 billion in underwriting profits last year on slowed healthcare claims, as patients avoided hospitals for fear of contracting the coronavirus.

Latest data from the Insurance Regulatory Authority (IRA) shows that medical insurance firms rebounded from years of losses compounded by rising hospital bills claims.

Kenya reported the first Covid-19 case on March 13, prompting the State to impose measures such as a dusk-to-dawn curfew, social distancing and work-from-home calls.

This triggered reduced hospital visits that spared insurers huge bills.

Official data shows that claims rose three percent to Sh21 billion and premiums increased six percent to Sh44.9 billion.

“Medical class made the highest underwriting profit of Sh1.30 billion, which may be attributed to people staying away from hospitals, resulting in fewer hospital visits due to fear of Covid-19,” Godfrey Kiptum, the IRA chief executive, said in the newly published annual report for 2020.

Reduced hospital visits translated to reduced revenues for health facilities, prompting some to implement layoffs and salary cuts amid assurances by health officials that sufficient measures had been taken to lower Covid-19 infections in hospitals.

Medical is the second-largest class of short-term insurance business after motor, in terms of gross written premium.

However, the business has been struggling over the years, with underwriting losses of Sh75 million in 2019 and Sh1.1 billion in the year ended December 2018.

Besides rising claims, medical insurers have also been at loggerheads with hospitals over the number of tests administered to patients, the use of expensive branded drugs as well as choice of expensive procedures such as Caesarean-Section delivery.

Insurance companies had attempted to block coronavirus-related claims stating that once the World Health Organisation (WHO) declared Covid-19 a pandemic in March 11, patients would settle their own bills if cases were reported in Kenya.

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.

Through their industry lobby, the Association of Kenya Insurers (AKI) the underwriters had said that medical bills, which can top Sh1 million per person, would be challenging if the numbers were huge and the pandemic persisted.

AKI said the companies faced great uncertainty if they continued to settle open-ended claims and pushed the regulator to set a limit at a level that the industry could withstand.

The IRA, however, directed that medical insurers to pay bills for Covid-19 patients without restrictions.

The regulator also pushed back on vehicle insurers who tried to turn away customers with accidents that happen past curfews.

Motor private and motor commercial classes of general insurance business incurred the highest losses of Sh3.33 billion and Sh2.11 billion respectively.

This was despite a sharp decrease in motor claims in terms of amount compared to the rest of the insurance classes.

This could be explained by a corresponding drop in premiums as public transport was halted in to and out of some counties. Private vehicle owners stayed at home or worked away from their offices during the pandemic.

Commercial motor premiums dropped eight percent to Sh20.2 billion while private vehicle premiums dropped one percent to Sh22.9 billion.

Claims on commercial motor rose two percent to Sh13.8 billion while private vehicle claims declined 8.2 percent to Sh15.6 billion.

“The decrease in claims under motor classes of business is mainly attributed to travel restrictions that was in place during the year due to the Covid-19 pandemic,” Mr Kiptum said.

The regulator said general insurance premiums amounted to Sh130.84 billion as insurance business underwriters incurred claims amounting to Sh57.36 billion as at end of quarter four in 2020.

This saw the companies cut industrywide losses from Sh2.9 billion in 2019 to Sh1.18 billion in 2020.