AAR blames high cost of health care for profit drop

April 26, 2017
The company says escalating costs leads to higher premiums, hurting those covered by private and public medical insurers like (NHIF)

, NAIROBI, Kenya, Apr 26 – The spiraling cost of healthcare in Kenya has seen AAR Insurance net profit for 2016 fall by 23 percent to Sh218 million from Sh285 million in 2015.

Despite posting a 48 percent growth in gross premiums, the company’s profit before tax fell from Sh411 million in 2015 to Sh319 million.

Gross written premiums increased from Sh4.4billion in 2015 to Sh6.5 billion while the total assets increased from Sh3.1 billion in 2015 to Sh5.2 billion last year.

Caroline Munene, the firm’s Managing Director, cited a tough operating environment characterized by increased cost of health care eating into the underwriter’s profit.

“Several factors are driving up health costs in the country including inefficiencies, over-servicing those with insurance, inflated consultancy, diagnostic and procedure fees. These among other factors have led to an increase in claim ratios and thus declining revenues for insurers,” Munene said.

Munene appealed to stakeholders in the sector to devise ways of lowering the cost of healthcare in the country.

She said escalating costs invariably lead to higher premiums, hurting those covered by private medical insurers and even public health insurance schemes like the National Health Insurance Fund (NHIF).

“Many countries including Kenya face the daunting task of taming the spiraling costs of health care. This calls for efficiency in the health system. However, achieving efficiency involves a delicate balance between cutting costs and ensuring quality and availability of services,” she added.

AAR Insurance is, however, keen on expanding its product portfolio and enhancing customer relationships with a commitment to develop a business environment that is client focused and one that will propel the success of Africa’s people.

AAR Insurance is the country’s second largest medical underwriter, with over 150,000 customers and 13 branches across the country, commanding 16 percent market share

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