GA Insurance Group Chief Executive Officer (CEO) and Principal
Officer Vijay Srivastava (left) and CEO Sandip Bhadury during the launch
of a Sh3,000 annual Covid-19 personal cover for Kenya on September 17.
The product was mooted to alleviate challenges Kenyans face when the
ailment suddenly strikes, with victims forced to close businesses and
isolate.
What you need to know:
- Insurance Regulatory Authority (IRA) said underwriters had concentrated their business in Nairobi with 83.2 percent of their premiums sourced from the capital.
- Mombasa makes up 4.7 percent of the premiums while Kiambu-1.7 percent, Nakuru-1.57 percent, Uasin Gishu 1.42 percent, Kisumu-1.22 percent and Nyeri-1.08 percent leaving the rest of the country unserved.
Slow insurance growth has left 97.6 per cent of the economy without cover for risk, with penetration continuing to decline for the sixth straight year.
Insurance penetration, which is the ratio of gross direct premiums to GDP, declined to 2.34 percent in 2019 from 2.43 percent in 2018. The world average insurance reach stood at 7.2 percent.
Insurance Regulatory Authority (IRA) said underwriters had concentrated their business in Nairobi with 83.2 percent of their premiums sourced from the capital.
Mombasa makes up 4.7 percent of the premiums while Kiambu-1.7 percent, Nakuru-1.57 percent, Uasin Gishu 1.42 percent, Kisumu-1.22 percent and Nyeri-1.08 percent leaving the rest of the country unserved.
Commissioner of Insurance Godfrey Kiptum said cover penetration is set to fall further as a result of the coronavirus pandemic, which led to restriction in movement that had a significant impact on aviation, marine and travel insurance sectors among others.
In addition, he said, the pandemic has resulted either in redundancies and salary chops which has a negative impact on pension and life assurance businesses.
Low demand
“Lower demand for insurance products hence, lower insurance penetration rates as well as increase in insurance claims from death, hospitalisation, events cancellation and business interruption covers, among other eventualities will negatively affect the insurance industry premium growth,” Mr Kiptum said.
In 2019, Kenya’s industry recorded Sh229.50 billion in gross premium up from Sh216.26 billion in 2018 split into long-term insurance business at Sh97.40 billion and general insurance at Sh132.10 billion.
The business of insurance resulted in an underwriting loss of Sh3.1 billion in 2019 from a loss of Sh2.5 billion in 2018.
This was due to rise in claims to Sh58.9 billion from Sh56.9 billion in 2018 driven primarily by medical -Sh20.4 billion, motor private-Sh16.6 billion and motor commercial-Sh15.3 billion.
Mr Kiptum said perennial losses were caused by a lot of undercutting by insurance companies which were taking on huge liabilities but charge low premiums.
Actuarial valuations
He said the authority has started demanding for actuarial valuations used to back premiums prices to reduce the disparities.
The loss in the main business was, however, offset by profits from investment segment of the business bringing the industry earnings of Sh15.1 billion in 2019 up from Sh7.2 billion in a similar period in 2018.
The industry asset base increased by 11.7 percent to Sh709.05 billion in 2019 from Sh635.04 billion in 2018 allocating Sh524.24 billion or 83.8 percent to investments. The investments were mainly composed of government securities at Sh365.82 billion or 61.6 percent.
Others include channels with composition of less than five per cent such as corporate bonds, commercial papers, investment in subsidiaries, preference shares (quoted & unquoted), loans and mortgages.
dguguyu@ke.nationmedia.com
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