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Microinsurer rejects half of claims on fraud detection
Turaco has declined half the claims raised by its customers in the three months ended June, attributing the high rejection rate to invalid claims as well as the detection of fraud.
Turaco Microinsurance Limited declined half the claims raised by its customers in the three months ended June, citing stronger fraud detection.
Data from the Insurance Regulatory Authority shows Turaco Microinsurance received 12,186 new claims in the period April to June, while 1,038 claims were outstanding in the first quarter of the year, bringing total claims raised by its customers to 13,224 worth Sh119 million.
Turaco, however, rejected 6,632 claims worth Sh66.9 million, being 50.2 percent of the total claims made. The insurer paid 5,765 claims worth Sh37.7 million, with 1,691 claims outstanding.
Turaco attributed the high rejection rate to invalid claims as well as the detection of fraud.
“The figures do not mean Turaco is rejecting valid claims. The quarter-on-quarter variation is largely explained by stronger fraud detection and prevention measures, which helped filter out ineligible claims earlier in the process,” said Turaco Microinsurance in a response to Business Daily.
Microinsurance companies were introduced by the regulator in 2023 to cover low-income earners with exposures of less than Sh500,000 in a bid to increase insurance penetration. Insurance penetration has remained low at less than three percent.
Due to the sensitivity of the low-tier business, the regulator requires companies to clear claims in 10 days while conducting customer education to ensure apathy doesn’t creep into the retail market. Turaco said it settles eligible claims in one to three days.
“This openness also means we receive some claims that fall outside the scope of cover,” said Turaco. “While this has resulted in a higher percentage of rejections, it is important to note that around 85 percent are due to clear and transparent reasons — such as the claimant not being on cover at the time of loss, claims submitted for individuals not enrolled, or benefits not included under the policy (for example, outpatient services under an inpatient-only cover),” added Turaco.
Insurance premiums paid by microinsurance clients are capped at Sh40 per day. Regulations governing the microinsurers also dictate that companies must use simple English for their policy documents, which are required to have the same font size to ensure details are not hidden in fine print.
Insurance companies that wanted to do micro business were required to register subsidiaries that catered for the low-income market. IRA has licensed six microinsurers, with two already in the market, Turaco and Britam Microinsurance. The four others – APA Microinsurance, Birdview Microinsurance, CIC Microinsurance and Star Discover Microinsurance – whose data was not included by the regulator, citing non-compliance.
“Data for the analysis does not include APA Microinsurance Limited, Birdview Microinsurance Limited, CIC Microinsurance Limited and Star Discover Microinsurance Limited due to non-compliance with the submission requirements,” said IRA in its quarterly report.
Britam Microinsurance's claim settlement ratio for the second quarter was 36.9 percent, with the other claims booked as outstanding. Britam Microinsurance had 15,610 claims worth Sh169.6 million during the second quarter ended June. The subsidiary of the listed Britam Holdings paid 5,765 claims of Sh83.2 million, listing the rest as outstanding claims with none declined.
