Rising Hospital Bills Cut Medical Insurers’ Profits

Latest industry data shows rising hospital bills cut health insurers’ profit margins in the first quarter of the year.

Statistics by the Insurance Regulatory Authority (IRA) reveal that providers of medical or health-related policies paid nearly half of the total claims in the general insurance business which is about 46.3 percent of the Sh16.85 billion total amount in claims the segment registered during the period.

This translates to the largest claims paid by the medical insurance class under general insurance business, with motor private and motor commercial classes also posting colossal claims payouts in the first three months of the year.

Motor private and motor commercial saw their respective claims payouts jump by 25.9 percent and 19.5 percent correspondingly of total industry claims in a period that witnessed a 13.3 percent increase compared to the same period last year where insurers paid claims worth Sh14.88 billion.  If an insurer pays a claim, it pays money to a policyholder because a loss or risk occurs against which they were insured.

Statistics show that only 20 percent of Kenyans have any form of health insurance, but over the years, a growing number of Kenyans have signed up for medical protection to cover their health, a situation that has now seen bumper increases in individual protection claims by insurers.

IRA says the reported claims incurred in the general insurance business amounted to Sh18.43 billion during the period under review. This was an increase of 10.3 percent from Sh16.72 billion reported in the first quarter of the previous year.

Under a claims-made and reported policy, both a claim must be made and that claim must also be reported during the policy period. A grace period may apply for claims made late in a policy period.

Motor classes of insurance business incurred claims contributed 49.5 percent of total claims compared to their contribution of 27.5 percent of the total premium under general insurance business.

“General insurance business remained the largest contributor to industry insurance premiums, contributing 61 percent of the total premium,” noted the report.

Motor insurance and medical insurance classes of business, it added, account for 63.5 percent of the gross premium income under the general insurance business. The general reinsurers incurred Sh4.55 billion in claims which was a decrease of 3.8 percent from the same period last year.

The General Insurance business is headed for profitability as underwriting performance in the period improved to a loss of Sh510.20 million from a loss of Sh1.74 billion reported in the first quarter of 2021.

Personal accident class made the highest underwriting profit of Sh712.27 million while motor private and medical classes of general insurance business incurred the highest losses of Sh1.04 billion and Sh628.58 million respectively. 

Medical care costs in Kenya grow by at least 10 per cent annually according to various reports with the inflation levels often thought to be the trigger since most of the medical equipment and medicines are imported.

Statistics show that National Hospital Insurance Fund (NHIF) covers 18 percent of Kenyans (estimated at 8.5 million Kenyans), whereas the 32 private health insurers collectively cover only 1 percent of the Kenyan population. This means that the majority of Kenyans depend on out of pocket to pay for health expenditure.

The main challenge of healthcare access in Kenya lies primarily in the acute scarcity of resources, and inadequate resource allocation. In the past few decades, the out of-pocket (OOP) expenditure has been increasing since the introduction of user fees in the health sector. 

Moreover, to limit the rising publicly-financed health expenditures, OOP expenditures have continued to be implemented in the country consequently leading to burdening social subgroups unequally.