The insurance sector in Kenya has recorded as much as Sh3.27 billion in underwriting losses, its worst in over two decades. Data released by the Association of Kenya Insurers (AKI) shows the loss was as a result of a huge gap between premiums collected, claims, and expenses from the previous year’s Sh1.12 billion.
According to AKI data, underwriting losses from insuring motor vehicles increased by 92.4 percent to Sh7.35 billion, with private vehicle insurance returning losses for the eighth year running.
In Kenya’s insurance sector, 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 (Sh1.6 billion). 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 as a result of premium undercutting in an effort by insurers to reserve market share. Out of the 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 Sh4.67 billion while losses from commercial vehicles increased 139 percent to Sh2.66 billion. Also, 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 Sh1 billion in medical cover to Sh139.3 million profit.
Other underwriting losses recorded are liability (Sh62.17 million), aviation (Sh79.2 million), and engineering (Sh130.3 million). The motor vehicle insurance losses took the shine off the sector’s improved performance in the fraud-prone medical insurance cover.