This archive report was first published on 5 May 2020.
Coronavirus Pandemic Forces Insurance Sector to Rethink Business Models ¶
As the world grapples with the COVID-19 pandemic, the insurance sector is facing unprecedented challenges. The pandemic has dramatically changed the way insurers operate, with the time-frame of risk coverage expected to shrink significantly.
According to Dr. Julius Kipng'etich, Regional Chief Executive of Jubilee Holdings, the current dynamics in the industry will force insurers to adopt the cash and carry model. This means that consumers will seek comprehensive cover for specific risks, such as road trips, rather than annual contracts.
Travel restrictions imposed on Nairobi, Mombasa, Kwale, and Kilifi counties have minimized exposure to risks such as accidents. Dr. Kipng'etich noted that travel insurance for fliers is one product that is specific for those hours on a flight, and this will apply to many other types of insurance contracts.
Among the issues informing the changes is that the interventions imposed to check the spread of the coronavirus have reduced operating hours, hence reduced incomes for workers and the owners. Many sectors have either laid off workers, sent them on unpaid leave, or slashed their pay.
Dr. Kipng'etich said that Jubilee and other insurers are open to renegotiations with affected workers to ensure disruptions on incomes do not affect the validity of the covers. Customers can seek premium financing from commercial banks as an option to keep up with their contractual obligations.
Hotel, travel, and restaurants have borne the brunt of the pandemic due to their physically interactive nature. When incomes dip, there is the natural decision to reallocate spending priorities, with plans such as insurance and savings taking an immediate hit.
Declaration of COVID-19 as a global pandemic by the World Health Organisation cushioned insurers from meeting the costs of treating patients. However, Kenyans have to pay for quarantine services if found to have been exposed, and later for treatment.
Dr. Kipng'etich suggests that insurers consider negotiating with their re-insurers in taking up the treatment tab, at least in part, for COVID-19 patients. Re-insurance providers also take a portion of the insured risk, meaning they would reimburse a portion of the claims paid by the principal insurer.
Besides the pandemic, Dr. Kipngetich called for urgent interventions to cushion the population from exploitative nuances by providers. He expressed concerns over unwarranted tests performed on patients with the aim of milking insurance covers dry.
Published on May 5, 2020.
