By GODFREY KIOI
As the world continues to grapple with an unrelenting Covid-19 pandemic, businesses have had to make radical adjustments to be able to operate in the fluid context.
While a number of these changes have been motivated by the need to survive and thrive; businesses have also tried, as much as possible, to cushion their customers from the ravages of the pandemic. This is borne out of the realization that these challenges, including the existential ones that are currently being faced by companies, are similar to those being faced by their clients. Eventually, the performance of businesses in handling the challenges posed by the advent of the novel coronavirus will mirror the performance of their customers in handling the same challenges.
Initially, with the restrictions on travel and physical interaction imposed by the Government to control the spread of the pandemic, the challenge was in ensuring seamless operations. It was especially tough for a business that has in the past relied heavily on face-to-face and paper-based communication. At Heritage Insurance, for instance, we have had to migrate most of our operations online, while enabling as many of our employees as possible, to work from home.
In our assessment, Covid-19 has fundamentally redefined office space. Workers are likely to reduce their use of such spaces to the very bare minimum, and only when absolutely necessary. We are likely to see the entrenchment of practices such as flexi-hours, as more workers adopt the culture of working from home. The ascendancy in the sale of office furniture and equipment in the last seven months has been illustrative, as people kit their home environments to be work-ready.
As insurers, this shift in work culture is also likely to change how we frame and structure some of our products. For instance, is the home office definable as a workplace for purposes of workmen’s compensation and policies such as those procured under WIBA (Work Injury Benefits Act)? WIBA is an employee benefit plan, anchored in law that guarantees that employees get financial compensation when, by accident, they suffer injury, become disabled or die while at work. In a case where an employee suffers any of these risks while working from home, is the financial compensation claimable? Most importantly, how would the loss be adjusted (evaluated), in such a context, considering that the employer has little or no control on how the home infrastructure is set up, let alone its safety antecedents, or lack thereof?
In early May, President Uhuru warned that some 500,000 Kenyan jobs were at risk in the next six months as a result of the pandemic. But the reality has been grimmer. It is estimated, based on data from the Kenya National Bureau of Statistics (KNBS), that about 1.72 million Kenyans lost their jobs in the three months to June, as the country wobbled under the weight of a coronavirus-induced lockdown, precipitating layoffs, pay cuts and furloughs.
The immediate result of this in the insurance industry is that it has never been harder to collect premiums. Gross Written Premium (GWP), which rose by over seven percent last year to Sh231.3 billion, according to AKI’s Insurance Industry Report 2019, is likely to contract this year. But the toll is likely to be worse in 2021, as the aftershocks of the Covid-19 pandemic spread outside the first epicenter that had tourism, travel, entertainment, and education in its crosshairs, into other support sectors.
In the last two quarters, we have had an unusual situation where insureds have been asking us to reduce their covers to bring the premiums down to manageable levels. We have had to listen and help some of our clients to restructure their policies thus.
When it comes to life insurance and personal accident policies, insurers have actively negotiated moratoria with the insureds, lasting from three to six months, based on need. In some instances, missed premiums have been converted into a loan, to ensure that the insured does not lose the benefits accruing from the policy.
With the home becoming the primary work station and initial restrictions in travel, there have been fewer vehicles on our roads. We also noticed a material reduction in the number of motor policy claims. Alive to these shifts, we introduced a cashback payment to clients on motor insurance premiums to customers on our regular cover and those on the telematics-based Autocorrect cover.
We are currently working on a usage-based motor insurance product. This will ensure that one’s premium is based on how often the car is on the road.
The author is the Managing Director, Heritage Insurance Company