Vehicle Insurance Premiums Increased in Price by Sh54 billion

Insurers’ gross premiums from motor underwriting increased by 14.1 percent in 2022 to Sh53.9 billion as premium costs rose to cover losses in the insurance class.

According to new Insurance Regulatory Authority (IRA) data, premiums increased from Sh44.4 billion in a period that saw motorists pay premium increases of up to 50%.

Higher annual premiums helped to reduce losses from the motor class of insurance, which returned a reduced underwriting loss of Sh7.6 billion in 2021, down from a wider loss of Sh9.5 billion.

The Kenya Human Rights Commission, for example, filed a petition challenging the legality of the action on the grounds that there was insufficient public participation, which initially opposed the underwriters’ efforts to increase premiums for customers.

Along with the increase in premium costs, some underwriters declared they would stop covering vehicles that were over 12 years old or had a value of less than Sh600,000.

The higher premiums have served to improve the liquidity of motor underwriters to meet claims from customers.

“We have seen an improvement in the motor loss ratios due to the increase in premium which will bring stability in this line of business and also ensure the availability of funds to pay claims,” Jubilee Allianz General Insurance CEO Adja Samb said.

“This is despite the cost of claims going up due to the rise in inflation.”

The motor private category experienced the largest loss reduction, going from Sh6.2 billion to Sh4 billion (34.4%), while the motor commercial line experienced a loss increase of 6.6 percent to Sh3.5 billion.

Despite this, claims continued to be the industry’s Achilles’ heel. For example, total claims increased by 5.8% to Sh37.4 billion from Sh35.4 billion.

For example, the cost of repairs has gone up due to the rising cost of spare parts, forcing the motor underwriters to pay out more for claims.

Motor claims paid increased by 8.1 percent from Sh29.1 billion in 2021 to Sh31.4 billion in 2022.

The Association of Kenya Insurers (AKI) previously claimed that the industry continued to report underwriting losses, primarily as a result of insurers undercutting one another on premiums in an effort to maintain market share.

At the beginning of 2022, the majority of underwriters increased their premiums, attributing the increase to a spike in claims, some of which were later determined to be fraudulent.

Insurance companies have in the past accused fraudsters of filing claims under multiple insurance policies on the same vehicle.

Lower claims, according to motor underwriters, will be the only way to guarantee the industry’s viability as it seeks a return to profitability, despite rising premium income.

“A predictable motor insurance class requires addressing avoidable accidents through partnerships with the government as there is no amount of premium that would cover heavy claims from customers,” CIC General Insurance Managing Director Fred Ruoro observed.

At the same time, higher premiums have driven some drivers away from comprehensive coverage in favor of third-party options.

Despite the mandatory requirement for motor vehicle insurance, absolute subscriptions to motor vehicle insurance have not been impacted.

Underwriters, aware of the premium cost pressures, have been looking into cost-cutting measures such as staggered payments.

“Insurance companies are cognizant of the impact of increased premiums and to make insurance affordable, they are coming up with more and more innovative solutions to respond to all needs and ensure the best quality of service. Some solutions include payment plans such as insurance premium finance where customers pay in as many as 10 instalments,” added Ms Samb.