Wairegi: How Britam will look like after coronavirus

Coronavirus pandemic touched off unprecedented disruptions in business operations and supply chains in addition to deadly medical complications.

This has put the spotlight on how insurance business is shaping up in the Covid season.

This is largely in terms of packaging life and non-life covers to take care of such unforeseen risks as well as general inquiries and claims in connection with the pandemic.

Britam Holdings #ticker:BRIT managing director Benson Wairegi spoke to Business Daily on how the firm and the industry at large are responding to the crisis.

The pandemic has caused business interruptions and health complications. How has this impacted claims?

There has been a reduction in claims, particularly medical claims because we hear not many people are going to hospitals after social distancing measures. We have also seen the number of motor claims, to a certain extent, come down initially in April, May and June probably because of the curfew. But the reductions could also be explained by the investments we have made in systems to mitigate the fraudulent claims that have riddled the industry over the years. Through our investments in IT systems as Britam, we are now able to detect fraud faster than before. The combination of Covid and investment in systems has up to this point seen a reduction in medical and motor. Our loss ratio in medical has come down to a low of about 60 percent from the highs of more than 80 percent. Our medical portfolio is now profitable. Motor’s loss ratio has also come down from highs of 85-86 percent to about 70 percent. This is still high.

How have the partial trade and travel restrictions affected premiums and revenue?

Obviously because of how Covid has affected businesses, we have seen a reduction in premiums both in general and life insurance. This is going to be a big problem for the insurance industry and even to the economy.

As GDP shrinks, it means you are not getting the business that you had planned to get. In fact, life insurance has probably been hit more because if you think of a customer who has education or life insurance policy and he or she has lost a job, the priority is to put food on the table not pay premium.

And so we have seen a reduction in persistence of life insurance premiums because people are not able to pay on time. Generally, so many businesses will not register the growth they had budgeted for 2020. In fact, they will probably see more of contraction.

How has Covid reshaped how insurers are packaging policies?

People still require to cover themselves against risks such as motor, medical and even education policy for your child. What is going to change is how that policy is delivered. It will probably be digitally.

Post-Covid, insurers will probably require to cover risks that were not envisaged before. So, generally, new products will come and processes which will probably change a lot more. Right now, we are looking at what policies are we offering and how they need to be tweaked in light of risks emerging as a result of Covid.

How are you managing costs amid falling premiums?

The reduction in premiums also affects liquidity, but fortunately for Britam, up to this point, we have not laid off any staff. We have decided to do the best we can by cutting the costs where we can, but we have so far kept all our staff on the payroll. What we have done is encourage our staff to take leave, but we still continue to pay them because many had accumulated leave. We have not sent staff home by way of laying them off, we have not cut their salaries.

How are you managing at a time when most companies have cut workers’ salaries and some even sent them home on unpaid leave?

We probably had some fat in the company. Through the efficiencies that we have been able to bring in through investments in systems, we didn’t want to take very drastic decisions. The company has become more efficient because of the investment in systems.

And we also had a voluntary early retirement in 2018. However, we have dramatically cut on staff on contract. You are here for six or 12 months and when your contract ends, we don’t renew it. We continue monitoring what is happening.

That is not to say it will not happen, but to be reasonably fair, we really wanted to observe the situation first, and so far our cost income ratio has come down from 40 to 33 percent.

How has social distancing guidelines affected workplace at Britam?

People have talked that post-Covid, we will go back to normal. This is unlikely. We shall never go back to the old ways of working. For us, 60-70 percent of our staff are working from home. Looking at post-Covid environment, not all our staff will come back to the office to work the way they used to. That means we are going to reconfigure our office space. We will perhaps require less working space because people are going to be enabled to work from home.

What benefits will you derive from that move?

We shall have to work on our rental costs. We will, perhaps, not require the kind of branch footprint of about 50, comprising of 33 outlets here in Kenya and another 20 outside. We will probably have to cut back (on branch network).

We will have to reconfigure our workplace, enable our staff to work more flexibly while still rendering services to customers from a remote location.

We are moving to digital first.