The coronavirus pandemic has dramatically changed operations of the insurance sector, with the time-frame of risk coverage expected to shrink significantly.
Already, the restricted movements owing to the partial lockdown of the economy means reduced exposure to harm, informing the consumers’ desire to reassess their need for cover.
Indications are that it could be months or even years before a cure or vaccine is found for the virus that is devastating economies, suggesting that the challenges posed might be long-term for insurers and the wider economy.
Most insurers enter into annual contracts with customers but the environment under the coronavirus pandemic has seen risks change significantly as well as incomes.
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Jubilee Holdings Regional Chief Executive Dr Julius Kipng’etich said the current dynamics in the industry will force insurers to adopt the cash and carry model.
The arrangement could see consumers seek comprehensive cover for their car, for instance, a road trip which has specific exposure, rather than an annual contract when the vehicle is hardly in use.
“What the coronavirus has taught us is that there would be major changes on our business models which appeared futuristic but are now with us,” Kipng’etich said.
Travel restrictions imposed on Nairobi, Mombasa, Kwale and Kilifi counties mean the dwellers can’t leave their areas - minimising exposure to risks such as accidents.
“Travel insurance for fliers is one product that is specific for those hours on a flight and this is going to apply to many other types of insurance contracts,” noted Dr Kipng’etich.
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Among the issues that are informing the changes is that the interventions imposed to check the spread of the coronavirus have reduced operating hours, hence reduced incomes for workers and the owners.
Already, many sectors have either laid off workers, sent them on unpaid leave or slashed their pay.
Many of such employees would be having some sort of cover, including to the National Health Insurance Fund which could be invalidated for failure of the workers to make their contractual premiums.
Dr Kipng’etich said Jubilee, and other insurers, are open to renegotiations with affected workers to ensure disruptions on incomes do not affect the validity of the covers.
“Customers can seek premium financing from commercial banks, as an option, to keep up with their contractual obligations and we are ready to help arrange this,” he said.
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Hotel, travel and restaurants by their very nature of being hugely physically interactive have borne the brunt of the pandemic. When incomes dip, there is the natural and sub-continuous decisions to reallocate spending priorities with plans such as insurance and savings taking an immediate hit.
It is for the same reason that such businesses and workers are seeking a review of their insurance contracts, Kipng’etich said. Declaration of Covid-19 as a global pandemic by the World Health Organisation, however, cushioned insurers from meeting the costs of treating patients.
Insurance provide cover for exposure that can be projected unlike pandemics which would be addressed by the individual or their governments.
Kenyans have also to pay for quarantine services if found to have been exposed, and later for treatment. Insurers, Kipng’etich says, would cover up to testing and only until confirmation that the insured is positive for coronavirus.
He suggests that insurers consider negotiating with their re-insurers in taking up the treatment tab, at least in part, for Covid-19 patients.
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Re-insurance providers also take a portion of the insured risk, meaning they would reimburse a portion of the claims paid by the principal insurer, as a means of reducing exposure.
Besides the pandemic, Kipngetich told Financial Standard, that country’s medical costs were unfairly high and called for urgent interventions to cushion the population from exploitative nuances by providers.
Top among his concerns are unwarranted tests performed on patients with the aim of milking insurance covers dry.
More than half of baby deliveries in Kenya among the insured mothers is via caesarean section, for instance.
Average costs for the operation range from Sh180,000 while the price for a normal delivery is below Sh50,000 in private facilities. For the public health facilities, normal delivery is free. “It is unacceptable that private facilities would push for caesarean deliveries,” Kipng’etich said.
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Besides, there is an urgent need to embrace generic drugs which retail for a fraction of the originals, but are just as effective.