Insurance industry’s net loss on underwriting business ballooned 437 per cent to a record Sh6.34 billion for the fourth quarter ending December 2021, up from Sh1.18 billion underwriters declared the year before.

It is the worst underwriting loss in over two decades, stemming from heightened Covid-19 restrictions in 2021 and larger parts of 2020 which restricted travel activities in the country. 

Industry watchdog, the Insurance Regulatory Authority (IRA) attributed the negative results to losses from indemnifying private and commercial vehicles which made underwriting losses of Sh6.17 billion and Sh 3.32 billion respectively.  Workmen’s compensation class made the highest underwriting profit of Sh2.79 billion.

Legal liability

This is a commercial insurance risk policy that covers the legal liability of an employer to provide compensation to its workmen in case of their death or accident.

This was mainly attributed to a high increase in underwriting loss in classes due to relaxation of restrictions that had been imposed on travel due to Covid-19 pandemic. According to the latest IRA data for the fourth quarter of 2021, motor private made an underwriting loss of Sh6.17 billion while motor commercial had an underwriting loss of Sh3.32 billion. 

Underwriting losses from insuring commercial motor vehicles rose by 57.9 per cent to hit Sh3.32 billion, intensified by fraudulent motor accident (injury) claims and price undercutting practices by the insurers. Fraud cases in the motor class, for instance, was the highest from the 34 cases reported during the period under review.

Associated cost

An underwriting loss is an associated cost made by an insurance company in a particular period or in relation to a particular activity because it had to pay more in claims than expected. Underwriting losses stood at Sh1.12 billion in 2018.

The sector regulator said the industry could have made an underwriting profit of Sh 3.15 billion if the motor business was to be excluded. However, excluding the motor business, according to IRA, would lead to a decline of 31 per cent of the overall general insurance business.