Ignore compulsory increase rates at your own peril.

The facts behind the recent increase in insurance rates:

Over the last couple of years, I have provided information to our current customers and prospects, about the rating increases that have been imposed by the insurance industry in Kenya. Fundamentally, these increases have been forced on the local market by reinsurers, who have the final say when it comes to setting rates. For those that may not have seen these, have a read of the following:

Click here to read the previous blogs

A Recent Example:

As I have mentioned several times in these articles, insurers that do not comply with imposing these increases run the risk of not being able to meet their claims obligations for their customers. I am not talking about the KES 1m car claim, or the lost mobile phone at KES 100,00, I am relating to the big fire or flood. Unfortunately, one of the JWS clients has recently had a catastrophic fire, which we believe will end up as a loss of over KES 2bn (around $20m).

We have dealt with many claims at JWS over the $1m mark, but this is the first major fire at this level, and it has been interesting and a great learning experience to see the process. Firstly, our Insurers (one of the top 5) appointed their own Loss Adjusters. Interestingly, the reinsurers also appointed a separate loss adjusting firm, we assume to ensure that nothing was missed. All loss adjusters, insurers and reinsurers visited the site at different times, and forensic investigators were called to investigate the cause of the loss. Clearly, in the background there was a lot of checking of policy wordings, sums insured AND ensuring the correct rates were charged at last renewal.

‘Cash Calls’:

Whilst this is happening, the Kenyan insurers have to make what is called a ‘cash call’. It sounds worrying, but simply, in the case where an insurer does not have the cash available to make the payment a one-off payment is made by the reinsurer to the insurer to enable the insurer to settle the claim.

It has been around 6 weeks since the fire and insurers and reinsurers for this claim are making an on-account payment of KES 250m (c$2.3m) in order to get the new machinery ordered, pay for the clearing up costs and replace some lost income. More payments on account will follow once the reinstatement gets under way.

Our Advice:

My message to anyone reading this is ensure anyone undercutting the market provides evidence that they have reinsurance approval; double check your sums insured; ensure the policy wording is valid and understood, and finally make sure you have a good broker and a secure and professional insurer.
Hat’s off to our partners in this, you’ll know who you are!

If you have any questions on this, please do not hesitate to contact us:
Email pink@jwseagon.com or call us on +254 (0) 709 455026.