By NJIRAINI MUCHIRA

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Insurance companies in Kenya endured another difficult year after profits plunged by a staggering 61.5 per cent in 2018.

In a trend that has become familiar in recent years, the industry saw cumulative profit after tax nosedive to $33.7 million from $87.7 million posted in 2017.

Non-life business posted the biggest loss of 26.6 million compared with $9.5 million recorded in 2017 with the motor sector leading the pack in losses at $25.7 million.

Notably, a near flat growth in commissions and expenses of 1.1 per cent to $660.3 million from $652.7 million saved the industry from deeper losses coming at a time when it had migrated to the risk-based capital regime.

Industry insiders attributed the massive decline in profitability to the capping of interest rates introduced in 2016 which continues to have a ripple effect on business because lending to insurable investment projects and assets remains constrained.

Besides, dwindling disposable income due to hard economic times has resulted in a decline in the uptake of insurance products, which has not only impacted insurance companies adversely but also led to a drop in penetration to 2.43 per cent from 2.71 in 2017.

“Hard economic times have led to the income sensitive population lowering the uptake of insurance due to reduced disposable income,” states the Association of Insurer (AKI) Annual Report 2018.

Despite recording the worst performance in five years, Kenya is upbeat of a rebound this year after some insurance companies posted impressive results for the 2019 half-year.

Regional insurer Britam’s half-year profit before tax rose by 78 per cent to $22.8 million, from $13.3 million over the same period last year, while Sanlam returned to profitability with net earnings of $6 million compared with $14.2 million loss in 2017.

“The industry braved a tough business environment in 2018,” said AKI executive director Tom Gichuhi.

The amendment of the Insurance Act directing customers to remit premiums directly to insurance companies in a move aimed at curbing rogue brokers is particularly expected to have positive impacts on the industry.

Across the region, insurance companies are also hoping for improved performance following the drafting of the East Africa Insurance Bill, 2018 that aims to create an enabling environment for the development of an integrated, safe, stable and inclusive sector.

In Uganda, regulatory changes and the launch of a 10-year market growth and development plan is targeting to drive penetration from less than one per cent to three per cent by 2025.

In Tanzania the industry has come up with initiatives to propel uptake including amending the insurance act to force importers to procure local marine cover while Rwanda has seen the introduction of higher capital requirements to safeguard the interests of companies and boost confidence.

“The levels of poverty, inequality and unemployment still remain very high within the region, as a result the insurance penetration remains low,” states the AKI report.

In Kenya, the AKI report shows that in a year when the economy experienced growth of 5.9 per cent from 4.9 per cent in 2017, the insurance industry continues to struggle posting a paltry three per cent growth in gross written premiums to $2 billion from $1.9 billion in 2017.

Non-life insurance continues to take the lion’s share of the total premium income at 60 per cent translating into $1.2 billion, a 2.2 per cent growth from 2017 while life insurance took the remaining 40 per cent share of total premium income at $831 million, representing a 4.3 per cent growth compared with 2017.

Medical insurance remains a bane with 16 out of 24 companies posting losses in the segment that also had the highest net claims incurred of $198.5 million.