Small insurance companies could be swallowed up through direct acquisitions by bigger firms, or merge in order to comply with new regulations.
The regulations that are coming in form of new accounting rules dubbed IFRS 9 and IFRS 17, are introducing stringent capital requirements.
Jubilee Insurance Regional Chief Executive Officer Julius Kipngetich says this will make it difficult for small insurers to comply.
“Insurance companies now will be forced to align their capital to be at the same ratio with the risk they are undertaking. In other words, the capital is going to be risk based,” said Dr Kipngetich in an interview during Jubilee Insurance Annual General Meeting yesterday in Nairobi.
He said that when the accounting rules finally take full effect in 2021, the country could have at least eight insurance firms left in operation. That is out of the current 47 insurers, since the majority who are unable to cope with the rules, will have to be sold or merge.
Medical insurance
“It is going to be a tough time, albeit a good one for consumers of insurance products. This is because fewer companies will bring down the level of competition and eventually the premiums will also go down,” said Kipngetich.
At the same time, the Jubilee boss painted a grim picture where medical insurance is eating into his company’s profits, as a result of fraud.
He averred that some pharmaceutical companies are colluding with doctors. In some cases, doctors are bribed to prescribe branded drugs to patients with Jubilee having to shoulder the resultant high cost.
“Some doctors don’t want to prescribe cheap generic drugs since they have been bribed to prescribe expensive branded drugs by companies that are manufacturing the drugs. This is keeping the cost of healthcare high, and also driving up premiums,” Kipngetich said.
