Insurers not prepared to pay claims in 30 days

Most insurance companies will find it hard to comply with the recent Government proposal that they settle claims within 30 days.

According to statistics by the Insurance Regulatory Authority (IRA), on average only two out of 10 claims are paid within a month. Generally, most insurance companies take more than 60 days to settle compensation claims, signalling an uphill task for the industry to comply with the latest proposal to fast-track settlement of claims.

In his budget statement for 2016-17 financial year, Treasury Cabinet Secretary Henry Rotich proposed to reduce the number of days insurance companies take to pay claims from 90 to 30 days.

“To protect insurance policy holders from long delays in settlement of their claims, I am proposing to reduce maximum time in which a claim should be settled from 90 days to 30 days,” the CS said in his budget speech.

IRA found out that 53 per cent of the general business liability claims such as medical costs to injured employees took over 90 days to be paid wrecking the lives of hundreds of Kenyan workers. Another 27 per cent were paid between 30 and 90 days. Only 20 per cent were paid within 30 days, according to the report titled Insurance Industry & Performance Trends.

Fraudulent claims

However, insurance companies were a little disciplined in claims settlement as far as non-liability claims such as medical and fire was concerned. The report said 68.5 per cent of these claims were paid between 30 and 90 days while another 23 per cent were paid within 30 days. Only 8.2 per cent of the claims took over 90 days to be paid.

It was almost the same with life insurance where 51.3 per cent of the claims were paid between 30 and 60 days, 24.8 per cent in over 90 days and 23.9 per cent in 30 days. The proposal to reduce the time-frame for claim settlement, while beneficial to policyholders might hurt an insurance industry that has been grappling with increased cases of fraudulent claims.

So far, the insurance players have not come out to openly oppose the proposals, however, it will be interesting to see how most of them will settle claims in 30 days without inadvertently paying out fraudulent claims in the process.

Between January and March 2016, the sector plunged into Sh166.4 million loss as it grappled with huge claims and expenses. This underwriting loss in general business was a decline of 279 per cent from the same period in 2014 when it recorded an underwriting profit of Sh92.7 million, according to a quarterly report by the Insurance Regulatory Authority (IRA).

Life business recorded a net loss of Sh216.8 million in the period under review compared to a profit after tax (PAT) of Sh905 million in the same period in 2015. In the same period in 2014, life business recorded a profit after tax of Sh1 billion.

Nearly half of the 36 insurance companies, 17 insurers recorded an underwriting loss with motor insurance inflicting the hardest blow. Increased claims by private motorists saw the insurance companies record an underwriting loss of Sh535.1 million in that period.