Covid-19 pushes policyholders to redeem insurance dues early

Kenyans hit hard by the Covid-19 pandemic raided their savings with non-liability insurance claims increasing by almost a fifth to two million between April and June.

This is compared to 1.67 million claims that were lodged in the previous quarter, according to a claims report released by the Insurance Regulatory Authority (IRA).

This means that many Kenyans — some of whom had lost their livelihoods due to the adverse effects of Covid-19 — redeemed long-term insurance such as a pension, life assurances, annuities, and investments.

Results released by insurance providers reflect a surge in insurance claims in the first half of this year.

Pension payouts by insurers dropped by Sh860 million last year compared to the previous year following a law that limited access to employer’s contribution fund.

An annual report of the Association of Kenya Insurers (AKI), a lobby for insurers, showed that pension claims fell to Sh23.65 billion in 2019 from Sh24.51 billion the previous year despite an increase in savings for retirement by members.

This has since changed with the law allowing access to 100 per cent of one’s contributions. However, 50 or 25 per cent must be deferred until one turns 50 years of age.

In total, insurance companies received over 2.1 million claims in the second quarter of 2021, a 19 per cent increase compared to the first quarter of the year (1.7 million), the report showed.

General liability claims such as medicine and workmanship went up by 9.8 per cent to 14,766 compared to 13,443 reported in January to March 2021.

General non-liability claims went up by 19.4 per cent to over two million from 1.67 million reported in the previous quarter.

The long-term insurance business posted an 8.5 per cent increase in the number of claims reported to 91,978 compared to 84,801 claims reported in the first quarter of 2021.

In the quarter under review, the claims payment ratio for general liability claims increased to 9.3 per cent compared to 9.2 per cent in the first quarter.

The claims payment ratio for general non-liability claims increased to 65.8 per cent in the second quarter of 2021 from 64.7 per cent reported in the first quarter of 2021.

The claims payment ratio for the long-term insurance business increased to 73.9 per cent compared to 73.7 per cent observed in the previous quarter.

“Madison Insurance had the highest claims payment ratio in the general liability claims category at 67.2 per cent followed by Kenya Alliance Insurance at 65.1 per cent while Resolution Insurance Company came in third at 32.4 per cent,” reads the report.

In the general non-liability claims payment ratio, Madison Insurance Company had the highest percentage at 81.6 per cent. AAR Insurance came in second place with a 72.7 per cent claims payment ratio. Jubilee Health Insurance was in third place at 71.2 per cent.

IRA has proactively provided a framework for claims settlement which all entities regulated under the Insurance Act should abide by.

The regulations require insurers to submit their monthly summary of claims returns within 15 days after the end of the month to which the returns relate.

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