This archive report was first published on 24 June 2020.
June 24, 2020, marked a significant day in the ongoing debate about high medical costs in Kenya. A row between a tier one private hospital and a leading insurer has brought to the forefront an industrywide problem that requires immediate attention.
The Covid-19 pandemic has had a devastating impact on the healthcare sector, with hospitals experiencing a significant reduction in patient numbers and revenues. However, this is not a new issue, and it is time for the industry to start interrogating the chronic underlying health system concern.
According to the Association of Kenya Insurers (AKI) 2019 report, the growth in annual medical premiums class in 2018/2019 was at 5.3 percent, representing 32.4 percent of the entire general insurance class, valued at Sh 42.42 billion.
Excerpts from the report show that medical had the highest amounts of paid claims at 36.3 percent of the general insurance business, valued at Sh20.93 billion, an increase of about Sh 300 million compared to the previous year.
"Incurred claims ratio (loss ratio) measuring claims incurred as a percentage of net earned premium income was at 74.4 percent in Q4 2019, compared to 75.7 percent for Q4 2018, a marginal decline of -0.5 percent of medical claims was also noted in Q4 2019 compared to Q4 2018, representing a 35.5 percent of the general class claims," the report stated.
Insurers blame hospitals for high medical costs, but the reality is that they need to bring sector players together to jointly explore solutions. The industry regulator, IRA, is also culpable in not seeking a mutual engagement with stakeholders in addressing this perennial problem.
However, there are baby steps being taken, especially with the recent IRA regulatory innovation sandbox launch. But innovation fundamentals dictate an AKI, IRA jointly funded kitty open to external enterprises to systematically explore solutions for each of these challenges.
A five-year strategic plan tackling one issue at a time is needed as opposed to attempting a one-all fix. With the top five insurers in the general class separated by less than two percentages each in overall market share, a 0.01 kitty to finance the innovation hubs is feasible and fair.
