Africa: It’s time insurance sector went hi-tech to improve services
By JULIUS ORAYO
The insurance sector in Africa remains underdeveloped despite the continent being home to 15 percent of the world’s population, with high economic growth. At the same time, the continent has an emerging middle class with higher income and desire for a better quality of life.
It generates barely 1.7 percent of global insurance premiums. While other sectors have benefited immensely and capitalised on these favourable economic factors, the low insurance penetration in Africa is due to various dynamics, including regulatory factors, market structures, lack of development of other segments of the financial sector, social/human development factors and cultural/religious factors.
In Kenya, the insurance sector premiums in 2016 topped Sh197 billion, with the short-term insurance premiums amounting to Sh123 billion. It had an underwriting loss (general and medical business) of Sh2.13 billion.
Some regulations have been put in place to support the general insurance business. They include those on marine and motor rates. However, some elements have not been addressed, leaving medical insurance incurring losses. A sector that supports the government’s universal health agenda should be fully supported by the government.
The medical insurance losses are driven primarily by operational costs, fraud, price undercutting and drug costs. No single silver bullet can solve this problem but steps can be taken to minimise the impact of each of these factors. I recently attended an industry forum and almost every medical service provider complained about late or non-payment of medical claims by insurers. What the service providers did not understand are the processes through which the paper claims submitted to insurance companies have to go through before they are paid.
For instance, in 2016, about 10 million medical claims (approximately 40,000 claims per day) were presented to private insurance firms in Kenya. Each claim form is accompanied by an invoice or several invoices, depending on the provider and the services offered, and most likely a prescription or lab test request form, averaging four pieces of paper.
The top 10 medical insurance companies receive thousands of claim papers per day for which they have to make payments in line with policy rules agreed on with the customers. It does not end there. The information on those pieces of paper is recaptured manually into the insurer’s systems before payment can be made.
These can take days or months depending on the resources available and the insurer’s systems capabilities. If you are lucky, all your claims will be processed and some paid. Chances are that some of these claims may end up misplaced or incorrectly captured, hence the delays in payment.
Legislation that will compel insurance players (insurers, intermediaries and medical service providers) to automate their operations will help streamline the sector.
As a country, we need to have standardised coding for diseases, procedures, drugs and any other related services and set baseline prices for these. Legislation to also control the use of branded versus generic drugs needs to be put in place and this should be supported by technology.
Physicians should be compelled to prescribe drugs with the generic content rather than their brand name.
Electronic claim filing, payment options and web-based tools will allow hospitals and patients to manage health care more effectively than traditional paper-based systems.
Insurance firms also need to provide online tools that will help patients make informed healthcare decisions.
The new generation national identity cards can be linked to a centralised healthcare platform that will help medical professionals provide better services. Insurance companies’ access to this data will help in pricing and reduce price undercutting. To the government, I say this is an opportunity to collect rich data regarding the population to enable adequate planning for the future.