NAIROBI, Kenya, Mar 29 – Surging costs of healthcare has pushed Kenya’s second largest medical underwriter, AAR Insurance, to double its claims reserve in anticipation of rising claims.
The company, which has over 200,000 customers spread across the country, has this financial year increased its claims reserve to Sh1 billion compared to about Sh450 million reserved in 2017, a move that will likely depress the company’s profitability.
AAR Insurance Group CEO Caroline Munene says the surge in Cancer and Non-Communicable Diseases (NCDs) such as diabetes, heart disease, and high blood pressure, combined with high service charges, and over-servicing of patients is driving up the cost of healthcare.
“We have made a conscious decision to increase our provisions for future claims. We have been observing the recent pattern of claims and rising cost of healthcare and are convinced that this is a necessary measure at this point,” added Munene.
According to the Ministry of Health, NCDs account for 40 percent or 100,000 deaths in Kenya annually.
The medical insurance business has continued to record surging claims as the industry paid Sh14.6 billion shillings and Sh17.6 billion in claims in 2015 and 2016 respectively.
Last year, the medical insurance players collectively incurred over Sh18.5 billion in claims, an amount expected to increase significantly in the coming years according to industry experts.
This trend will likely push up the cost of insurance premiums, further driving insurance products beyond reach for a majority of Kenyans already reeling from the effect of a steep rise in inflation.
AAR insurance alone paid Sh3.3billion in claims up from Sh2.7billion paid in 2016.
Last year, AAR Insurance was ranked among the top insurers in settlement of claims in the non-liability general insurance category.
According to the Insurance Regulatory Authority (IRA) data for the second half of 2017, AAR Insurance was ranked top after it settled 86.3 percent of the 256,661 claims it was handling during the period.
The company rejected a total of 1,778 claims.
It also ranked highly in the first quarter of the year after settling 81.4 percent of all its claims.