Nine insurance firms swim in losses on back of under-cutting

Fraudulent claims more common in the auto industry have been blamed for most losses made by insurance firms. [PHOTO: FILE/STANDARD]

By JACKSON OKOTH

Nine insurance companies found themselves in unfamiliar territory after posting huge losses in 2012.  This is as a combination of fraudulent claims and low penetration of products took a toll on their earnings.

Insurers have blamed their losses on consumer apathy and rampant price under-cutting arising from unhealthy competition in the industry. Among those affected is Apollo Insurance, which made a pre-tax loss of Sh66 million down from a profit of Sh40.6 million in 2011.

Metropolitan Life made a loss of 91.2 million, an improvement from a loss of Sh125 million made in 2011, while Old Mutual Life made a loss of 618 million from a profit of Sh180.7 million made in 2011.

 Huge losses

Also in the negative territory was Takaful, whose losses decreased to Sh48.6 million from Sh122.8 million posted in 2011. Insurance firms that posted a decline in profits in 2012 compared to the previous year include Gateway whose profits declined from 558.3 million to Sh13.3 million.

 ICEA Lion Life’s profit fell from Sh727.6 million to Sh633.3 million while Intra Africa saw its profit decline by half from Sh171.5 million to Sh89.4 million. Invesco had a profit loss of Sh32.1 million from Sh50 million in the previous year while Jubilee Insurance saw its pre-tax profits decline from Sh763 million in 2011 to Sh655.8 million in 2012.

 Other insurance companies whose profits shrunk are Kenya Alliance — from Sh202 million in 2011 to 173.4 million last year. APA had its profits decline to 234 million in 2012, from Sh307.8 million.

 While the  nine companies made losses, the entire insurance sector grew by 18 per cent in 2012, posting Sh108.5 billion in gross written premiums compared to Sh91.6 billion registered in 2011.

Despite this growth in revenue, the overall penetration of insurance remains low, with most Kenyans still locked out of insurance services.

“Only seven per cent of the Kenyan population has one form of insurance or another, leaving a big market that we are yet to penetrate,” said Mark Obuya, Chairman of the Association of Kenya Insurers (AKI).

He made these remarks yesterday while releasing the 2012 Insurance Industry Annual report in Nairobi.

Insurance penetration

Currently, Africa registers the lowest contribution to global insurance premiums, at 1.6 per cent while the average insurance penetration on the continent stands at 36 per cent.

Leading countries in insurance penetration in Africa include South Africa, Namibia, Mauritius and Kenya. South Africa is the most dominant with a market share of about 90 per cent of life business. Frontiers that will contribute to growth this year include micro-insurance, agriculture and bank assurance. 

“Insurance companies must also build capacity to cover risks in the emerging oil, gas and mining industries,” said Tom Gichuhi, AKI Executive Director.

 Profit before tax for the entire insurance industry increased from Sh9.68 billion in 2011 to Sh14.8 billion in 2012. The overall insurance penetration increased marginally to 3.16 per cent in 2012 compared to 3.02 per cent in 2011.