Impact of Covid 19 on insurance business in Kenya
Covid-19 disease has had a major impact on most sectors of the economy. The World Health Organisation (WHO) has advised on simple but effective measures against COVID-19 such as wearing face masks, social distancing, hand washing with soap and flowing water. Coronavirus disease 2019 (COVID-19) was first reported in Wuhan China in December 2019. As at 10th October 2020, there were 37.4 million infected globally and 1.08 million deaths. The World Health Organization declared COVID-19 a pandemic on 11th March 2020 after spreading through 114 countries and infecting over 118,000 people.
When an epidemic spreads beyond a country’s borders, the disease is officially considered a pandemic. Pandemics have ravaged human civilizations through history. The first documented pandemic was in 430BC in Athens and the disease was suspected to be typhoid. There was a Cholera pandemic in Russia in 1817 that resulted in the death of an estimated 1 million lives.
One of the deadliest pandemics reported in human history is the Avian flu that was later named Spanish flu. It was responsible for the death of 50 million people worldwide. The 1918 flu was first identified in Europe, the United States and parts of Asia before swiftly spreading around the world. Other pandemics include the HIV/AIDS pandemic reported around 1981 and the SARS of 2003.Although pandemics have visited untold suffering and deaths, they have dramatically shaped societies, helped in formulation of public policy and ultimately better health care systems worldwide, thus the adage; every cloud has a silver lining. Governments over the years have committed huge budgets in Water and sanitation systems as a measure to eradicate disease spread as well as in treatments and vaccines.
Kenya reported its first COVID-19 case on the 12th of March 2020.Following this, was a raft of measures through the ministry of health to control and contain the disease. These measures were mainly geared to high level of hygiene and minimization of face to face interaction. Quarantine would be imposed for those suspected to be infected.
In managing the current pandemic, governments seem to draw critical lessons from the Spanish flu of 1918. During the Spanish flu, public health officials at the time were unwilling to impose quarantines due to World War 1. In Britain, for example, a government official knew fully well that a strict civilian lockdown was the best way to fight the spread of the highly contagious disease but he wouldn’t risk crippling the War. Ultimately the disease claimed more casualties than the war itself.
The containment measure spelt by Kenya Government brought with them a new norm with heavy repercussions to all the sectors of the economy. Daily update on infection status and advisory from the ministry of Health would be awaited with bated breath. Fortunately, many Governments in Africa and Kenya in particular chose disclosure, awareness and preparedness. As a result, access to the technology capabilities through laptops, desktops, Collaboration tools to help with audio, video, and screen-sharing. An IT support team was on standby to answer employees’ questions and help them continue to do their jobs remotely.
The Directorate of Occupational Safety and Health Services (DOSH) published a return to work advisory with 16 key requirements related to workers’ safety. While employees worked from home some employers incurred extra costs in purchase of additional workspaces for their staff in order that they were are able to achieve the social distancing guidelines.
Insurance requires close human interactions hence the social distancing measures have resulted in a myriad of challenges. Insurers physically interact with their clients on a regular basis. Brokers and agents alike prospect for renewal and new business by physically meeting their clients and making presentations as well as answering customer queries. Currently, connections can only be achieved through alternative channels such as digital tools.
Further, insurance companies rely on various service providers to deliver their promise. A motor vehicle technology specialist has to physically see the vehicle to determine the condition, verify the details and establish the value before a motor policy is issued. Risk surveyors are required to make site visits then advise property insurance customers on risk mitigation protocols to implement in their premises. A motor vehicle assessor will be engaged for accident cases to quantify the damage and discuss with a repair Centre on repair modalities. For fire losses, a loss adjuster is sent to customers premises to verify if the loss is caused by an insured peril and if so, to quantify the loss. Insurance companies would also like to meet their customers on a regular basis to appraise them on new offerings and address concerns they may have. There is also the clients and brokers face to face trainings that insurers constantly provide that were disrupted by the pandemic. Issues of claims admissibility may strain relationships with insurers their customers’ business has gone down hence levels of their exposures. Consequently; premiums have dwindled. Customer’s cash flows have greatly been dented resulting to failure of meeting premium obligations. A good number of customers due to their economic situation have scaled down on a number of policies, reduced level of coverage and in some cases cancelled existing insurances. The Hospitality, Logistics, Education sectors and their suppliers could have borne the greatest brunt of the pandemic. Pundits argue that insurers will be the ultimate shock absorbers for the economy and society.
Insurers may have to seriously revise their budgets, review their workforce and compensation policies. Most insurers especially in life and annuity sectors will register minimal investment income due to low returns caused by interest rate decline, poor performance in the equity market coupled with an underperforming real estate sector.
Paradoxically, some sectors will emerge stronger during this pandemic. The accelerated shift to online shopping and increased importance of cloud computing in the remote work era will drive technology companies to new heights. Online businesses and pharmaceuticals are likely to reap big during the pandemic. For example, Facebooks has reported that their lost advertisement business has been offset by entertainment spend on the platform. Zoom, a remote-conferencing service company provides a cloud-based platform for video and audio conferencing. A majority of businesses are using it to connect colleagues from disparate parts of the country. They offer a smooth and seamless connection to allow discussions and meetings to take place. Many schools have adopted Google Classroom for online classes.
Its’ not all gloom though for the insurance companies. In every crisis, there is an opportunity. The crime rate according to national statistics has declined during the last six months. Police records show the number of traffic accidents have gone down by about 10% since the onset of the pandemic. Visits to hospitals have significantly fallen going by reports in the media. These have resulted to reduced claims spend for the insurers. Customers are initiating the insurance purchase process especially for health products rather than insurers pushing through agents or other channels. Most insures have committed major investment in technology and digitization during this time of the pandemic. You will notice that though virtual motor certificates issuance in Kenya was conceptualized before the pandemic, implementation has been largely smooth during the pandemic.
To wrap it up, insurers will be expected to focus on developing products that are relevant such as disease specific products like COVID-19 while having pre-existing conditions in mind.
Jamleck Mugwe is a Senior Accounts Manager at Minet Risk Solutions – Corporate Division.