Kenya’s insurance sector records US$327m underwriting loss

Image: SmallBusiness.co.uk

KENYA – The insurance industry in Kenya recorded as much US$327m in underwriting losses in 2019, its worst in over two decades.

Data released by the Association of Kenya Insurers (AKI), the industry umbrella body shows the loss was because of a huge gap between premiums collected, claims and expenses from the previous year’s US$11.2 million.

According to AKI data, underwriting losses from insuring motor vehicles increased by 92.4 percent to US$73.5 million, with private vehicle insurance returning losses for the eighth year running.

In Kenya’s insurance industry, motor vehicle insurance is known to be the main growth driver for the general insurance market.

 However, rising losses are posing a threat to the survival of insurers, as well as dragging down the sector that is struggling with fraud and price undercutting.

The poor performance emerging from motor insurance led general insurers into the fifth straight year of underwriting losses, with the last recorded profit in 2014 (US$16 million).

In 2019, general insurance on private, commercial, and public service motor vehicle insurance accounted for 35 percent of gross direct premiums.

Based on AKI data, losses incurred is because of premium undercutting in an effort by insurers to preserve market share.

Out of the country’s 36 companies that underwrote motor commercial last year, 25 companies made losses compared to 21 companies in 2018.

Underwriting losses from private vehicle covers rose by 72 percent to US$46.7 million while losses from commercial vehicles increased 139 percent to US$26.6 million.

Similarly, 30 companies made losses from insuring private vehicles last year compared to 23 companies the previous year.

More so, insurers have had to deal with rampant cases of fraud in the form of multiple insurance contracts and claims on a single vehicle.

 The situation is made worse by price undercutting as the 36 insurers offering motor vehicle covers compete for customers.

Insurers are at the shorter end of the rope, as vehicle owners use their vehicles for purposes different from those insured against, making it difficult to make proper risk profiling.

As a result of the underwriting losses made by motor insurance, it became the worst performer among the 12 main insurance classes under general covers.

The loss incurred overshadowed the industry’s improvement from an underwriting loss of US$10 million in medical cover to US$1.39 million profit.

Other underwriting losses recorded are liability US$620,000million, aviation US$792,000 million and engineering US$Sh1.3million.

The motor vehicle insurance losses took the shine off the sector’s improved performance in the fraud-prone medical insurance cover.

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