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Kenya: Insurers Launch Data On Which to Base Premiums
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Business Daily (Nairobi)
5 May 2008
Posted to the web 5 May 2008
Steve Mbogo
The insurance industry in Kenya will launch a locally developed system to offer premium rates for life insurance that reflect social reality.
But efforts to come up with a similar system for calculating medical insurance premium rates with localised data have faltered because of insufficientmedical data.
The medical data available is combined with accident data, which does not give a true representation of the hospital visits and spend trends.
The current rates for life insurance are calculated using data contained in the "mortality table", which was borrowed from the British colonialists in 1949.
While this is expected to change later this next month, that of calculating premium rates for medical insurance products, also borrowed in the same year will remain the same.
Mr Sammy Makove, the acting chief executive of the Insurance Regulatory Authority , said the country's failure to come up with localised tables known as "morbidity table" has been of great setback.
The failure has been particularly felt in the medical insurance sector where the premium rates are perceived as high, locking out millions of Kenyans from the services.
However, it does not necessary mean that development of localised morbidity table, based on the monitoring of Kenya's illness trends would bring down the medical insurance premiums.
But analysts say it would help the industry to know how to structure its premium pricing in line with the medical/illness trends of specific social sectors and even specific geographical areas. A Government committee mandated to reintroduce the national health insurance scheme that would assure affordable health insurance to all Kenyans for instance has attempted to come up with medical trends data to help it determine likely premiums for the proposed national body.
Their data shows that the poor make the highest number of hospital visits, a total of 16 every year, but use the lowest amount of money (Sh1,637) every year to pay for their healthcare .
The "rich" make the lowest number of hospital visits averaging 9.6 a year and use Sh2,704 on average per visit. In between the two groups are the "lower middle" income group who visit 14 times and pay Sh3,565 for a visit.
The "middle income" make 10.4 visits and pay Sh3,073 each time, while the he "second rich" make 10 visits and pays Sh3,635 for each.
The highest number of hospital visits were in Nairobi at 17.7 a person a year, followed by the Rift Valley at 13 visits, Central 11.5 and Coast at 7.8 visits.
Eastern province tops in terms of outpatient expenditure at Sh4,531, followed by Central at Sh4,038 and Nairobi at Sh3,594. The lowest spender is North Eastern at Sh1,054.
Mr Makove says the industry is now working to segregate medical data from the accident data so that in a time of say three years, the industry will be able to develop a morbidity table.
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"The medial insurance sector is the fasted growing in the last three years and without proper statistics, pricing is more or less a gamble," he said.
Actuaries in Kenya say collapse of some insurance companies especially those dealing with medical and public service vehicle can partly be attributed to poor pricing models.
Ashok Shah the chief executive of APA said the industry is keen to cooperate with hospitals to capture this data.
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