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mortality & morbidity investigation project

The insurance Industry currently operates with A1949-52 mortality tables, which are rather outdated. Mortality and morbidity rates are used by insurance companies for pricing insurance products and for actuarial valuation of insurance business portfolios. Mortality data is also critical in pension design and valuation. A study on mortality and morbidity can also assist in obtaining data on the impact of HIV/AIDS on insurance. Data on mortality and morbidity is also important at a national level because it facilitates efficient and effective decisions in resource planning and utilization especially in provision of medical services. The main goal of this project was to strengthen the insurance industry in Kenya. The purpose and key output of the project was to develop updated tables on mortality and morbidity. The project commenced on 1st July 2005 .The project entailed an investigation of mortality and morbidity and was completed in September 2007.The project was funded by FIRST Initiative (FIRST is a multi donor grant facility providing technical assistance to promote financial sector deepening).It was conducted over a period of two years in four phases namely:

  • Ordinary Assured Lives Mortality Experience
  • Group lives Mortality Experience
  • Annuitants Mortality Experience
  • Morbidity Experience

The project consultant was Alexander Forbes Financial services. Project reports were peer reviewed by Qundiem Consulting of South Africa.

Current position
The KE 2001-2003 Tables for Assured Lives are published. One of the amendments in the National Budget for year 2011/2012 that took effect on 9th June 2011 is legal notice No. 51. The Seventh Schedule paragraph (1) of the Insurance (Amendment) Regulations 2010 was amended to adopt KE 2001 – 2003 Tables for Assured Lives mortality rates are now used in calculating theliability under life policies.
The initial study covered the period 2001 to 2003. While the study was a great success, the three year period covered by the study was too short. Concerns were raised by both the Actuarial team and the Peer Review team regarding the quality of data because this was the first time such an exercise was being carried out in Kenya. They recommended that the review should be done after a five year period as this would improve the data quality and subsequently impact on quality of the tables.
The AKI Board made a decision to carry out a review of the mortality tables to cover the period 2004 to 2010. This would ensure that the tables give a better understanding of emerging risks and trends in the market.
AKI has engaged Alexander Forbes to carry out the review exercise, which is currently on-going.

AKI is in the process of implementing a system that will centralise motor insurance data to facilitate the detection of fraudulent claims and assist in the management of motor certificates. The Integrated Motor Insurance Data System (IMIDS) will promote best practice across the industry through use of standard formats for processing underwriting and claims information; facilitate information sharing among AKI members; and promote good governance through compliance of regulatory issues.
The IMIDS system will have statistics in various categories including; stolen motor vehicle data, salvage data, written-off motor vehicle data, uninsured motor vehicles, accidental claims and other key indicators.
Once completed, the system will provide a link to other key stakeholders in motor insurance in the country such as Kenya Revenue Authority (KRA), the Police and National Transport and Safety Authority (NTSA). However, to protect the privacy of policy holders, the system will have an information management system that protects sharing of personal client information.
Motor Insurance Business accounts for almost half the total gross premium for general insurance. In view of the fact that the data will be centrally located; this will improve the efficiency and effectiveness of processing claims an action that will greatly improve customer service delivery levels in insurance companies.

Highlights from the Medical Actuarial Study 
The AKI Secretariat engaged Zamara (formerly Alexander Forbes) to undertake an actuarial determination of medical insurance rates in the country. 
The study, which took the better part of the year, aimed to review the factors responsible for continued poor performance of medical insurance despite significant growth. The study also aimed to analyse industry data over a period of five years and prescribe ideal medical insurance premium rates and terms for both inpatient and outpatient packages.

The key highlights from the study indicate that the highest claims cost for inpatient are pregnancy related conditions and diseases of the respiratory system, while outpatient goes to both diseases of the respiratory and digestive systems. This is also reflected in the morbidity rates, where a spike is witnessed in children below 10, and adults between ages 25 and 45 due to respiratory diseases, and pregnancy related conditions respectively.

The average number of visits per claimant is 1 for inpatient and 4 for outpatient at an average cost of Ksh. 107,451 and Ksh. 5,177 respectively. A higher percentage of the inpatient cost is classified as ‘miscellaneous’, while that of outpatient goes to medication.

The study recommends that there is need for stakeholder engagement between medical service providers, health care system regulators, underwriters and the insureds. There is much needed improvement of data standards through use of standardised codes, data capture of both premium and claims data, and use of data analytics to make informed decisions.

For the insureds, there is need for the underwriters to engage them in preventive exercises such as healthy eating and active lifestyles as opposed to curative measures. Underwriters should provide deterrents such as co-pay and incentives such as medical savings accounts. 

Highlights from the Medical Actuarial Study Presentation


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