Bad news for insurers as fall in Covid-19 infections spike hospital visits

People queue for Covid-19 mass testing at the Kibra DO's Office in Nairobi. [Wilberforce Okwiri]

Medical insurers posted a 93.8 per cent drop in underwriting profits last year on increased healthcare claims as patients resumed hospital visits after overcoming fears of contracting Covid-19.

Insurance Regulatory Authority (IRA) data shows that medical insurers’ underwriting profit — the difference between premiums collected and claims plus expenses paid — dropped to Sh80.43 million in the financial year ended December 2021, compared to Sh1.3 billion in the preceding period.

The sharp decline in profits came during the period hospital visits increased as people who had kept off for fear of contracting the virus overcame it in an environment of falling infections.

Increased hospital visits saw claims paid by insurers towards medication spike by 28.5 per cent or Sh5.99 billion to hit Sh26.99 billion.

The latest value of claims is more than Sh21 billion for 2020.

Jubilee Health Insurance, one of the largest medical underwriters, saw a near doubling of claims paid from Sh3.93 billion to Sh6.18 billion.

Medical claims paid by UAP Insurance rose from Sh3.7 billion to Sh5.2 billion as those of AAR Insurance Kenya hit Sh3.07 billion from Sh2.68 billion in 2020.

Other medical insurers with high claims were CIC Insurance (Sh2.89 billion), Madison (Sh2.09 billion), APA (Sh1.89 billion), Britam (Sh1.59 billion) and Resolution (Sh1.08 billion).

The trend is in line with the forecasts from Association of Kenya Insurers CEO Tom Gichuhi who had last November said the “honeymoon” that medical insurance companies enjoyed in 2020 was likely to be cut short in 2021.

“We are seeing increased hospital visits. We are also likely to see a spike in respiratory diseases, which are among the biggest drivers of medical claims since people are not consistent with wearing masks as it was in 2020,” Mr Gichuhi said.

Kenya reported the first Covid-19 case in mid-march 2020, prompting the State to impose measures such as a dusk-to-dawn curfew, social distancing and calls for remote working.

High payouts

Insurers had raised the alarm about high Covid-19 infections substantially raising medical bills.

However, the muted rise in Covid-19 infections and the limiting of virus covers to patients seeking care in public facilities helped shield insurers from high payouts in 2020.

The restrictions, in an environment of increased Covid-19 infections, had kept many patients away from hospitals for fear of contracting the infectious virus.

However, a fall in the pace of infections and vaccination drive has seen people who had rescheduled hospital visits resume, in what is turning out to be bad news for insurers.

Medical underwriting has been problematic to insurers alongside motor insurance, with the two being the major insurance classes under the general business.

Insurers have been at loggerheads with hospitals over the number of tests administered to patients, the use of expensive branded drugs as well as choosing expensive procedures such as Caesarean-Section delivery.

Fraud and price undercutting continues to be the weak link for medical insurers even as claims keep rising at a faster pace than that of premiums collected.