Rwanda’s medical insurers are worried about the threat of dismal premium income and fraudulent practices to the sub-sector.

According to players who spoke to Rwanda Today, low subscriber volumes mean they cannot settle claims and still make a profit.

“Health insurance is currently a loss-making venture. The premiums cannot pay our providers,” said Marc Rugenera, the chief executive of Radiant Insurance company.

According to Blaise Uhagaze, the executive secretary of Rwanda Health Insurers Association, underwriters were paying out more than 100 per cent of the written premium in claims against the industry maximum of 80 per cent. They cannot raise premiums for fear of losing to competition in a small market.

“Private health insurance has fewer subscribers. When prices go up they suffer losses, and there is no risk-sharing because unlike in the past when a loss in health insurance would be covered by car insurance, or any other segment, now everything is on its own,” noted Uhagaze.

The law demands that insurance business be split into different independent units.

The biggest source of losses attributable to fraud, he said, occurs when hospitals or clinics file claims for expensive laboratory tests on a patient that were never carried out.

According to a recent survey by KPMG, insurers in the region were worried about fraud due to weak detection systems in the value chain, which results in inflated claims.

The survey showed that 12.5 per cent of Rwandan insurers, agents and brokers worry about fraud, closely followed by Uganda with 12 per cent, Kenya with five per cent and Tanzania with four per cent.

In Rwanda, the detected fraud claims were reported to be worth between Rwf114.7 million and Rwf147.7 million in 2015. The survey showed that in Rwanda, 33 per cent of insurance companies have recently conducted fraud risk assessment, which is slightly higher than the regional average of 21 per cent.

Analysts have observed that insurance fraud thrives on absence of front end fraud risk controls like training, segregation of duty and staff vetting. The absence of punitive measures for offenders, has also led to increase in these cases.

Medical insurance, fire and vehicle management companies are the most affected by inflated claims.

Medical insurance providers continue to grapple with inflated bills from hospitals and clinics as policy holders collude with health services providers to inflate costs.
The fraud, according to experts, adds an extra 18 per cent extra premium as the insurers seek to recover their losses.

According to data from the central bank, insurance industry total liabilities and equity were Rwf233.2 billion in December 2013. This grew to Rwf309.4 billion in 2015 and by September 2016 it stood at Rwf345.6 billion.
Unearned premiums have also been growing. In December 2013, they stood at Rwf13 billion, rising to Rwf15.9 billion in 2015, and Rwf20 billion in September 2016.

The bad times for private insurance companies can be seen from the deteriorating trend of their net underwriting profit which stood at Rwf15.9 billion at end of 2013 but fell to Rwf8 billion in 2015 and to a record low of Rwf2.4 billion in September 2016.

The loss ratio for insurance companies was 40.2 per cent in December 2013 it went to 54.3 per cent in 2015 and 59.6 per cent in 2016.

This decline is also attributed to poor underwriting performance in the market that is characterised by price undercutting.