State decision on life cover slows insurers’ growth

Association of Kenya Insurers CEO Tom Gichuhi (left) holds up the newly launched Insurance Industry Annual Report 2015, with AKI Vice Chairman Hassan Bashir last week. Insurance companies are losing business in the life insurance cover segment, a new report has shown. (PHOTO: FILE/ COURTESY)

Insurance companies are losing business in the life insurance cover segment, a new report has shown.

Growth in the segment declined significantly from 29.4 per cent in 2014 to 8.6 per cent last year.

“The life insurance cover took a hit from the Government’s decision to stop making contributions for civil servants and disciplined forces,” Association of Kenya Insurers (AKI) CEO Tom Gichuhi said during the launch of the Insurance Industry Annual Report 2015.

“The lack of State contributions has therefore seen many insurance companies scale down on offering the life cover.”

The AKI report further shows that insurance penetration has declined from 2.93 per cent of gross domestic product (GDP) in 2014 to 2.79 per cent in 2015.

Mr Gichuhi explained that the low level of penetration is as a result of the rebasing of the country’s economy in 2014.

“When the economy was rebased, our GDP expanded by about 25 per cent. Insurance penetration is calculated as per a country’s GDP. The expanded GDP means a show of low penetration,” he said

Regional average

However, compared to its East African neighbours, Kenya’s penetration is above the regional average of 1.09 per cent.

“The crisis in Burundi has affected the region’s economy significantly ... and this affected the insurance business,” Gichuhi said.

“The region’s gross premiums in 2015 stood at Sh238.4 billion, and Kenya accounted for 68 per cent of this,” he added.

Another segment that significantly concerned insurers was the health insurance cover.

Medical cover suffered from high fraud committed by both the insured and healthcare providers. The industry report added that, in a move that is currently hitting insurers hard, hospitals are ganging up to form cartels, and unilaterally increasing medical costs.

However, the report applauded the Government’s enhancement of the National Hospital Insurance Fund (NHIF) cover, which has reduced the burden on industry players.

Overall, the insurance sector recorded a dip in growth at 9.8 per cent last year, compared to 20.3 per cent in 2014. This was mainly a result of the huge drop in the contribution from life cover, the report said.

Insurers were also concerned with the dip in investment earnings. These earnings and other income that are not a part of the premiums collected decreased by 16.1 per cent, from Sh46.7 billion in 2014 to Sh39.2 billion last year.