A doctor attends to a patient. FILE PHOTO | NMG
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.
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