A good time for insurers

Medical insurance companies went through very happy months of March to June. When Covid-19 landed in Kenya, many Kenyans shied away from visiting hospitals. We wore face masks, washed hands, sanitised, stayed at home or kept social distance, inadvertently keeping away many other diseases. But as hospitals counted losses for reduced business, medical insurers were smiling to the bank.

Medical insurance typically pays for medical, surgical, prescription drug and, sometimes, dental and optical expenses incurred by the insured. Only about 20 per cent of Kenya’s population have some form of medical insurance coverage, including NHIF.

Ordinarily, insurance companies make money from three sources: Premiums collected from their customers, earnings from investing a small portion of those premiums and, more prominently, when they don’t pay claims. When few or no people go to hospital, medical claims are few.

In ‘spreading the risk’, insurers rely on the fact that not all of their clients are ever going to claim; they sell as many policies as possible and use the collections from the majority of policyholders to pay for the few claimants.

Some counties were locked down, reducing the risks of long distance travel, and night life suspended by the curfew, cutting off the associated risks. Many passenger vehicles were off the road but their insurance cover was not suspended.

Technically, insurance companies make losses from insurance contracts, commonly known as underwriting losses, when they pay claims. That is why they will wrestle claimants to the ground to avoid paying claims. But of course they will pay up quickly a few sensational claims to get mileage.

The Insurance Regulatory Authority (IRA), which regulates, supervises and develops the insurance industry, must wake up to be seen and heard giving professional direction in the insurance industry.