Lack of solution to Resolution Insurance woes spooks clients

Pine Creek Records CEO Peter Nduati. [David Gichuru, Standard]

It will have to live up to its name by finding a resolution or its founder, Peter Nduati, will have to add Resolution Insurance to his list of collapsed ventures.

At 32, Mr Nduati founded Resolution Health, about six months after losing his job as general manager at AAR Insurance Kenya.

In 2014, he described himself as “a common guy” from Dagoretti, Nairobi, who grew up selling meat at his father’s butchery.

“If I ever sold you bones, please forgive me,” he once quipped in an interview with Centonomy, a financial literacy firm that teaches about managing personal finances. 

But today, if Resolution Insurance, which has defaulted on claims and suspended non-medical insurance was to collapse, customers won’t forgive him.

This is in a market where the Regulatory Authority’s (IRA) hall of shame is replete with insurers who do not honour their promises.

Out of the 1,637 grievances that customers filed against insurers in 2020, about 900, or 55 per cent, were related to delayed payments.

Incurred claims under Resolution stood at Sh1.59 billion by the end of last year. In 2020, it failed to submit its audited financial report to the IRA and was hit with a Sh3.2 million fine.

Resolution Health was incorporated in 2002, becoming the first company to be registered as an exclusive medical insurance provider in Kenya.

It later changed to Resolution Insurance in 2013, offering it room to branch into other general insurance products. Now it has to shrink first before it can dare to expand again.

For the next three months, it is going to do the unthinkable: it will have to say “NO, thank you” to customers who come seeking to renew non-medical covers or take new ones.

It is ailing financially and requires cash injection to the tune of Sh2 billion to stay afloat. Acting Managing Director Mr Bernard Githinji says there have been “significant delays” in raising the capital and customers are feeling the heat.

While Mr Nduati has not come out to still customers’ anxiety, his passion for business and the ability to fall and rise again are being put to the test once more.

But as a former rugby player at Impala Rugby Club, he well knows that in the struggles to win the ball and score that try, sometimes you win and sometimes you fall and have to try again.

“I went to business with zero. I had just lost my job. I had a mortgage, and I had young children,” he once said. Mr Nduati has opened up several times that before making a name as a successful business person, he had four failed businesses.

He tried his hands at the hair salon business and failed, woke up and attempted to groom television news anchors where he made his first Sh1 million but watched the money grow legs and walk away.

Mr Nduati would later venture into real estate, only to discover it was not going to be the real deal. He crossed over to marketing by launching Consumer Benchmark. It also failed to impress.

Mr Nduati considers himself a “corridor entrepreneur” - one who starts a business, grows it, and uses the proceeds to invest in another venture.

Between January 1999 and March 2002, he was the general manager at AAR Insurance Kenya before launching Resolution Health in August 2002, going on to write what had for long been seen as a success story.

Nduati, who studied Economics at Punjab University and then went to Scotland for his Master of Science in Insurance, now faces another test on his resolve to keep Resolution, which last year received a new investor - Linkham Group.

The UK-based global insurance solutions firm purchased the equity holding of private equity firm, Leapfrog Investment in Resolution.

Mr Nduati said the deal would benefit Resolution technology transfer and enhanced underwriting expertise and network.

But without money, the dream risks crumbling like a house built by precariously balancing playing cards.

An unverified video last week showed a disgruntled customer pursuing a Sh58,000 claim at what is now left of Resolution’s offices - an empty hall with customers’ claims scattered all over the floor. The acting MD, Mr Githinji, knows the risk of not having the money to pay claims or reinsurance to lower risks could brew a storm for the firm.

“General insurance business has experienced delayed settlement of claims and non-establishment of requisite reinsurance treaties. This exposes the policyholders and the company to huge cash flow risks should a claim arise,” he said.

Suspending the non-medical insurance business means Resolution will stop motor vehicle, home, travel, personal accident, professional indemnity and school insurance.

Also affected are policies for business, employee benefits, marine, bonds, engineering and hotel and restaurant insurance - all of which the insurer has been offering.

This at a time data from the regulator shows Resolution Insurance returned an underwriting loss of Sh457.32 million in the financial year ended December 2021 as eleven out of the 12 classes it insures posted losses.

Resolution has struggled to pay claims and had by December, for instance, accumulated over Sh9 million in debt relating to customer bills at the Nairobi Hospital.

Suspending non-medical covers looks set to hurt premium income for the insurer that is also pursuing leadership changes with the board in the process of nominating new directors.

The firm is also signalling cost-cutting measures going forward as it seeks to steady its operations.

“Going forward, our focus shall be on sustaining and growing the medical business, mitigating the adverse outcomes of suspending general business underwriting and eliminating non-core processes and structures,” said Mr Githinji.