Analysis of the Impact of Covid-19 on the Non-life Insurance Industry Activities: a Kenyan Perspective

Abstract

The COVID-19 pandemic has caused significant disruptions to economies and societies worldwide, including the insurance industry. While various studies have been conducted on the impact of the pandemic on the insurance sector, there has been limited research on the specific effects on non-life insurance firms in Kenya.This study examines the impact of the COVID-19 pandemic on non-life insurance companies in Kenya, focusing on the analysis of gross premium income and claims incurred. The data spanning from 2013 to 2022 was divided into pre-pandemic and pandemic-affected periods. We utilized SARIMA models to forecast expected values for 2020 and 2022 and employed the Mean Percentage Error (MPE) metric to quantify the pandemic’s specific impact. The analysis of gross premium income revealed a negative impact during the year 2020, with the actual total gross premium income falling short of the expected amount by -3.1%. This decline was likely caused by reduced demand due to economic uncertainties and decreased business activities during the pandemic. However, in the subsequent years, 2021 and 2022, the industry exhibited resilience, with the actual total gross premium income surpassing the expected values by 4.5% and 5.3%, respectively, indicating a promising recovery as economic conditions improved and businesses rebounded from the pandemic’s initial impact. Conversely, the analysis of claims incurred showed a contrasting pattern. In 2020, the total claims incurred were slightly lower than the expected claims by -0.019%, indicating a positive outcome during the pandemic as actual claims were lower than anticipated. This was attributed to reduced economic activities, travel restrictions, and decreased accidents. However, in 2021 and 2022, non-life insurance companies in Kenya faced higher claim payouts than initially expected, with actual claims incurred exceeding the expected claims by 0.644% and 0.757%, respectively.This change could be attributed to the normalization of economic activities, shifts in risk patterns, and potential delayed claims from the previous year. Our findings highlight the significant impact of the COVID-19 pandemic on the non-life insurance industry in Kenya, causing disruptions in gross premium income and claims incurred. Despite facing challenges during the pandemic, the industry demonstrated resilience and exhibited signs of recovery in the post-pandemic years, showcasing the adaptability of non-life insurance companies in Kenya during challenging circumstances.