A tough operating environment, coupled with a surge in claims due to the COVID-19, saw medical underwriter AAR Insurance Kenya’s overall performance decline by 55 percent to Ksh 234 million last year compared to Ksh517 million in 2019. Profit-before-tax also declined from Ksh 756 million to Ksh 317 million in the same period.
Gross written premiums, representing the company’s revenue, declined marginally by 3 percent from Ksh 5.86 billion to Ksh 5.68 billion. However, net earned premiums grew 19.7 percent to Ksh 3.74 billion as total income also increased 14.6 percent to Ksh 4.56 billion.
Net claims and policyholders’ benefits rose 54.2 percent to Ksh 2.59 billion from Ksh 1.68 billion the previous financial year, with the company paying out close to Ksh 200 million in COVID-19 claims in 2020, signaling the harsh financial impact of the pandemic on health insurers.
AAR Insurance Kenya Managing Director, Nixon Shigoli, attributes the surge in claims to COVID-19 impact on business and families. “2020 was an extremely challenging financial year given the sudden shocks of the new coronavirus health crisis which significantly affected our bottom line given impact on many employers and families,” explained Shigoli.
Total assets grew by 4% to close the year at Kshs 5 billion while shareholders’ funds increased to Ksh 1.3 billion from Ksh 1.1 billion in 2019. Management expenses ratio improved from 35% in 2019 to 30% in 2020 despite an increase in operating expenses by 3% due to costs incurred in cushioning staff and customers against the pandemic.
“Currently, 80 per cent of our staff are working from home. We have taken measures to ensure minimum disruption to our business while at the same time ensuring the health and safety of our customers.” He said.
Going forward, AAR Insurance is banking on accelerated digitization of its operations to improve efficiency and drive growth of its business. COVID-19, according to Shigoli, has amplified the importance of digital transformation in insurance.
“The biggest winner is digitization. We are seeing increased use of digital platforms partly due to COVID-19 limiting in-person contact between clients and service providers. However, convenience is also a driving factor especially for tech-savvy consumers seeking real-time solutions to their insurance needs,” he explained.
He added that the insurer has automated most of its services leading to improved efficiency, faster turnaround times and a better customer experience.
In addition to digital, AAR Insurance is also re-aligning its business to focus on product innovation and expansion into new, mainly under-served markets like Small and Medium Enterprises (SMEs) and micro-insurance.
“Our focus will also be on tightening claims management, enhancing our customer relationships and deepening innovation in our distribution system.”
AAR Insurance is among the leading medical underwriters in East Africa and has over 200,000 customers in Kenya.