AAR doubles claim reserve as medical costs rise

AAR doubles claim reserve as medical costs rise
Nixon Shigoli, MD AAR Insurance Kenya

Medical insurer AAR has raised its claim reserve to Sh1 billion in the current financial year as the cost of healthcare continues to rise.

This comes as AAR saw its medical claims rise to Sh3.3 billion in 2017, with increasing cases of non communicable dieses.

AAR chief executive officer Caroline Munene said extended coverage of diseases  such as cancer and diabetes had bumped up the cost of healthcare with more cases reported each year.

“Diseases such as diabetes, heart disease, cancer among others, combined with high service charges, provider-induced utilization of services, and over-servicing of patients on a fee-for-service basis is really driving the cost of Medicare up,” Ms Munene said.

The medical insurance business has continued to record surging claims.

The industry paid Sh14.6 billion and Sh17.6 billion in claims in the 2015 and 2016 respectively.

Rising medical claims are also attributed to the low profit margins of medical underwriters.

Ms Munene said the recognition of rising costs had prompted AAR to set aside a bigger kitty for future medical claims.

“We have made a conscious decision to increase our provisions for future claims. We have been observing the recent pattern of claims and the rising cost of healthcare and are convinced that this is a necessary measure at this point,” Ms Munene added.

At the same time AAR Insurance has appointed Nixon Shigoli to the role of managing director following the elevation of Ms Munene to Group chief executive officer for East Africa.

Mr Shigoli will be responsible for the overall operations and management of AAR Insurance Kenya with a focus on steering the company to achieve the targeted company profits and implementation of the company’s strategic plan.

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