Private vehicles pile Sh2.74 billion loss on insurance firms

Motor private class was the highest loser in the general insurance business in 2017 after posting a loss of Sh2.74 billion, the latest industry report shows.

The loss is attributed to rampant fraud by some private vehicle owners and their associates — agents and garage owners.

The vice has been a major concern with industry reports showing higher claim rate and losses, an indication that fraudsters have jammed the market.

The 2017 insurance industry report by the Association of Kenya Insurers (AKI) indicates that there was, however, a decline of 20.12 percent from the previous year’s numbers when the class recorded a loss of Sh3.43 billion.

This can partly be attributed to recent developments where AKI introduced an information sharing platform called the Integrated Motor Insurance Database System meant to curb rampart fraud.

AKI said from the portal, underwriters are able to verify the underwriting data and claims history of an insured as well as they receive alerts on various fraud indicators that have been built into system.

“We have experienced an influx of data driven solutions to everyday problems,” said Tom Gichuhi, AKI executive director on Thursday last week.

Also some underwriting companies have developed mechanisms of fighting the vice.

A recent case is with CIC Insurance which introduced a car repair centre. CIC said in the pilot programme it had been able to save up to 17 per cent on repair costs after accidents.
The AKI report shows that there were 36 companies, which offered the cover, with only 11 recording a profit.

“The non-life business recorded an underwriting loss of Sh1.01 billion in 2017. This was an improvement from 2016, where the underwriting profit was Sh2.1 billion. The highest loss was reported in the motor private sector at Sh2.74 billion,” the IRA report shows.

Car insurance is a legal requirement for private and commercial drivers, and failure to procure motor cover is an offence and drivers may incur huge penalties or get disqualified from driving.
Types of motor insurance coverage include comprehensive, third party, fire and theft, and third party.

READ: Customer fraud is new threat to Kenyan firms

The report shows that net claims incurred in 2017 grew by 2.5 per cent to hit Sh56.21 billion from Sh54.86 billion in 2016.

Medical insurance had the highest claims of Sh20.56 billion followed by motor private and motor commercial at Sh14.25 billion and Sh12.86 billion respectively.

Technical loss ratio, which is the difference between premiums paid to an insurance company and the claims incurred by the company expressed as a percentage, saw medical insurance having the highest technical loss ratio of 73.4 per cent followed by motor private at 71.7 per cent.

Aviation insurance had the lowest technical loss ratio of -166.5 per cent in 2017. Motor insurance is usually divided into private and commercial vehicle insurance.

AKI data shows that last year, the gross written premium for motor insurance was Sh44.75 billion, with private motor comprising 48.09 per cent and commercial had 51.91 per cent. Motor private recorded a 5.05 per cent growth in 2017 to stand at Sh21.52 billion from Sh20.49 billion in 2016.

However, motor commercial premiums recorded a decline of 3.33 per cent to Sh23.23 billion in 2017 from Sh24.03 billion previous year.