NAIROBI, Kenya, June 25 – The cost of life insurance is set to drop following the launch of the Kenya 2001-2003 mortality tables. The Association of Kenya Insurance (AKI) says the tables will facilitate accurate pricing of insurance products.
The tables contain information on the total number of deaths in the country and will provide precise data to be used in the management of long term business operations for insurance companies.
AKI chairman Stephen Wandera said on Friday that the mortality data will enable insurance companies create adequate reserves for future claims and for actuarial valuation of insurance business portfolios.
“Life insurance companies are able to calculate the prices at which life insurance products should sell and the price at which annuities or pensions should actually sell,” Mr Wandera said.
“From the outset when the insurance Act was launched in 1984, Kenya did not have its own statistics of mortality,” he pointed out.
He said that data on mortality and morbidity is crucial as it facilitates efficient and effective decisions in resource planning especially in the provision of medical services.
“It is a cause of celebration obviously for us Kenyans that we have managed to do it. We are only the second country in Africa to do so, the first being South Africa,” he said.
“It is also a day to celebrate because we are now able to have mortality tables that are relevant to our particular situation which means that the pricing of the products that we will develop are going to be relevant.”
The Commissioner of Insurance Sammy Makove called on insurance companies to carry out their business in an ethical manner and practice self regulation to deal with price undercutting.
“The mortality rate changes with the age. The older you are, the higher the risk of death and therefore the pricing is different for various ages,” he stated.
“The benefit of this table is that we shall now be more scientific in the pricing of insurance products. We also expect that most likely the price of individual life policies may come down a bit,” he added.
He explained that mortality data is critical in pension design and valuation; it can for example assist obtaining data on the impact of HIV/AIDS on insurance.
He stated that data on mortality and morbidity is also important at a national level since it facilitates efficient planning during the provision of medical services.
“We expect that the process of approximations will now be over and that we will get more accurate information to make important decisions on health,” he said.
From 1986, when the AIDS pandemic begun, the assumptions implied by use of the American1949-52 mortality tables became increasingly inadequate causing the insurance companies to become excessively cautious.
The threat of a higher number of deaths than had been reserved for meant potential disaster in the life insurance business.
Insurers responded by excluding death as a result of AIDS, reviewing fee cover limits and by increasing the cost of premiums.
The mortality investigation project commenced in July 2005 with a view to developing updated tables on mortality and morbidity.