General insurance claims payouts jump to Sh43bn

insurance claims

General insurers paid out claims amounting to Sh43.1 billion in the first six months of the year.

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General insurers paid out claims amounting to Sh43.1 billion in the first six months of the year, marking a 25 per cent jump in the period a weak shilling pushed up prices of spare parts and medicines.

The amount was a rise from Sh34.5 billion paid in the same period last year, piling pressure on insurers’ profitability, according to the latest data from sector watchdog, Insurance Regulatory Authority (IRA).

Liability claims payment—those paid towards third parties—stood at Sh9.45 billion while non-liability claims— those paid to policyholders—came in at Sh33.64 billion during the review period. The rise in the amounts paid out as claims was despite the number of liability claims falling by 429,960 or 10.8 per cent to 3.53 million. Non-liability claims rose by 20 per cent to 24,694.

Claims in key classes of general insurance—motor private, motor commercial, and medical—have seen an increase in the value of claims partly on increased price of spare parts and imported medicine.

The rise in price of spare parts and medicine is partly due to the shilling having shed about 21 per cent of its value against the US dollar in the past 12 months, making imports such as car parts more expensive.

The claims paid out in the general business came in the period in which long-term claims settled hit Sh38.44 billion. During the same period, insurers declined claims worth Sh850.4 million split as non-liability (Sh621.68 million), long-term (Sh185.2 million), and liability (Sh43.54 million).

Claims declined are those that insurers refuse to pay for various reasons per policy document.

IRA is yet to release half-year underwriting results. General insurers had, however, suffered underwriting losses in their mainstay business of insurance by the end of the first quarter.

Underwriting loss in the period had quadrupled to Sh2 billion from Sh510.2 million as claims from commercial vehicles and hospital bills rose sharply.

Underwriting losses—the difference between premiums collected and claims plus expenses paid— were highest in motor commercial business, with the loss increasing over four times to Sh2.08 billion.

This was followed by medical insurance, which saw its underwriting losses widen from Sh629.9 million to Sh1.15 billion, overtaking the Sh726.9 million loss that had been made in the whole of last year.

Medical, motor private, and motor commercial had the highest amounts of paid claims at Sh8.24 billion, Sh5.02 billion, and Sh4.64 billion. The three classes jointly constituted 88.9 per cent of all claims paid by general insurers.