Insurance premiums to slow on spending cuts

Deloitte warns that consumers in countries such as Kenya are running on tight purses and the temptation to opt out of insurance plans is elevated. PHOTO | FILE

By PATRICK ALUSHULA
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Summary

• Deloitte warns that consumers in countries such as Kenya are running on tight purses and the temptation to opt out of insurance plans is elevated.
• Deloitte further said in the insurance outlook report for East Africa that loss-making products such as group life are likely to experience a further deterioration as insurers undercut to maintain their client base.

Insurers must prepare for muted growth in premiums as firms and individuals cut spending, a new report has warned, citing increased economic hardships and service mistrust in the Covid-19 era.

Audit and advisory firm Deloitte warns that consumers in countries such as Kenya are running on tight purses and the temptation to opt out of insurance plans is elevated.

“Consumers are under pressure to cut down on “unnecessary” expenses, and insurance premiums are likely to fall under this category, putting pressure on both new business volumes and client retention,” said Deloitte.

“Insurers need to be prepared for a potential contraction in premium growth arising from corporates cost-cutting on non-essential expenses.”

Deloitte further said in the insurance outlook report for East Africa that loss-making products such as group life are likely to experience a further deterioration as insurers undercut to maintain their client base.

The warning comes at a time Kenyan insurers are recording a spike in policy withdrawals and surrenders amid reduced renewals and new business in the face of deteriorating economic conditions.

Covid-19 situation is putting life insurers on tenterhooks at a time official data shows that surrenders and withdrawals last year jumped by 14 percent to Sh9.24 billion from Sh8.11 billion.

Customers are struggling to keep up with their premium payments on life assurance and pension products as others take loans against their policies to navigate the financial uncertainties.

Deloitte added that insurers may also struggle to win new customers given that mistrust levels have gone up especially as many firms ride on exclusion clauses to avoid paying claims related to the health pandemic.

Kenyan insurers had by end of June paid more than Sh120 million in Covid-19-related claims and cautioned last month that it was becoming unsustainable to keep up with payments.