| Class | Earned Premium (KES) | Current Service Claims (KES) | Past Service Claims (KES) | Current Service LR | Reserve Development Impact | Reported LR |
|---|---|---|---|---|---|---|
| Motor Private | 562,431,022 | 400,573,095 | 170,355,477 | 71% | +30% | 102% |
| Motor Commercial | 487,173,832 | 307,343,658 | 265,879,788 | 63% | +55% | 118% |
Historical Reserving Trends
Jan - Dec Incurred Claims
Key Observations
A persistent pattern of delayed loss recognition.
Reserving only affects the timing of profit recognition but does not change the ultimate profitability of the portfolio.
Over-reserving defers profits to future periods, under-reserving defers losses to later years.
Historical results suggest that reserve strengthening has been spread across multiple financial periods in an effort to moderate earnings volatility. However, this has resulted in current revenue continuing to absorb adverse claim development from prior underwriting years.
The deterioration is largely driven by long-tail third-party bodily injury claims, with a significant proportion linked to the Watu Credit portfolio.
Current Reserving Philosophy
The Company has adopted a more proactive reserving approach, including immediate reserving of all notified third-party injury claims upon notification.
Reserve levels have also been strengthened to reflect higher court awards, with a working assumption of KES 500,000 per injured claimant currently being formalized within the reserving framework.
In addition, regular claims analytics and portfolio monitoring have been introduced to improve responsiveness to emerging claims trends and support timely management intervention.
The introduction of the Small Claims Court is expected to accelerate settlement timelines, resulting in faster claim development and improved visibility of ultimate claim costs within shorter development periods.
Key Challenge
To offset the impact of dropped poor-performing accounts with long-tailed claims, we should aim to grow the Motor Commercial class, targeting well-performing accounts while maintaining strict underwriting discipline.
Reserve Adequacy Target
The goal is to limit reserve deterioration to 5% of Earned Premium per year.
This provides capacity for: * 70% Current Accident Year Claim Ratio * 10% Intermediary Commission * 15% Operating Expenses * 5% Profit Margin
Improve claims management efficiency and regular monitoring using incurred claims ÷ earned premium claim ratio approach for different segments.
Profitability by Cover type - TPO VS Comprehensive
Other Segments
Targeted Portfolio Actions
Analysis of historical performance indicates that the following segments require focused intervention:
New Business – Implement targeted repricing and strengthen risk selection for consistently underperforming segments & comprehensive background checks.
Agency Channel – Enhance portfolio monitoring and strengthen risk management controls.
Online Contracted Taxis, Motor PSVs and Motorcycles – Require telematics as a condition for onboarding, supported by repricing and tighter risk selection criteria.
Kisumu Branch – Undertake targeted remedial action, as poor performance is concentrated within a small number of major accounts.
Address the emerging risks of Motor Private bancassurance business. Analysis of insured category shows that small clients underperform relative to all other categories under both classes.
There is a continued need to proceed with the portfolio clean-up process, either by dropping high-risk accounts or repricing adequately to reflect elevated risk exposure.
Several major accounts have exited the portfolio, likely due to sustained poor performance, including (but not limited to): Babito, Zulfikar.
At the same time, a number of large accounts with weak performance indicators remain active, notably:
There is a continued need to proceed with the portfolio clean-up process, either by dropping high-risk accounts or repricing adequately to reflect elevated risk exposure.
Initial discussions indicate that the above motor accounts are connected to other non-motor businesses, either directly or through related parties.
We recommend conducting a portfolio-level analysis at both gross and net-of-reinsurance levels. Since motor risk is largely retained while property classes are heavily ceded, there is a potential for the insurer to absorb motor losses from these large accounts while ceding profits from non-motor lines to reinsurers, which could negatively impact the overall financial position of GA. Any agreed remedial actions should carefully consider the ceding patterns of these accounts.
Some large accounts are performing well, including Car General (226 vehicles, GWP of KES 40 million, claim ratio below 50%) and Transmara (560 vehicles, GWP of KES 52 million, claim ratio below 60%).
Executive Support on Key Accounts: Enhance executive involvement in negotiating key motor accounts to maintain a balanced portfolio between motor and property classes, in view of existing cession patterns within the property segment.
We begin by decomposing the overall claims expense into its key components: claim payments, service provider fees, miscellaneous expenses, and the offsetting impact of excesses, salvage, and recoveries.
The main driver of claims expense is Claim Payments, followed by Service Provider Fees and Miscellaneous Expenses.
We observe a growing positive contribution from Salvages and Recoveries, while the impact of Excess is shrinking, potentially reflecting increased uptake of excess protector coverage.Further investigation into the motor private salvage value recorded in 2022.
For Motor Private, Claim Payments declined in 2025, but the benefit was offset by higher Miscellaneous Expenses.
For both Motor Private and Commercial, we examine the pattern of claims split into Legal and Own Damage, as summarized below.
Impact of Frequency and Severity
Motor Private 2025: Total paid claims declined, primarily due to a reduction in Own Damage payouts, driven by a decrease in the number of claims (-11%) and lower average severity (-5.5%).
Motor Commercial 2025: Total claims payouts increased, mainly driven by growth in Own Damage claims.This increase was driven by a higher average claim cost (+22%), despite a decline in the total number of claims paid (-6%).
Impact of Watu
Significant reduction in Own Damage Watu claim payments, indicating a run-off pattern.
Significant payouts continue on the Legal side, totaling KES 194 million in 2025.
Legal claims remain under development, and further payouts are expected.
We now narrow the focus to review Legal claims first, followed by Own Damage claims.
Note: It is not possible to reliably distinguish the nature of Legal losses (e.g., property damage, bodily injury, or death). The scatter plot below shows Legal claims paid over the past 10 years.
The largest Legal claim paid in the past 10 years was approx. KES 23 million in 2016.
Earlier years had few Legal claims, where outliers could significantly distort the average.
It is becoming increasingly common to pay claims above KES 5 million. This underscores the importance of exercising more caution on benefit limits, i.e. any one person and any one event.
For Own Damage (OD) claims, it is possible to further classify them into: Windscreen, Repairs, Thefts (partial & total), and Total Loss (from accidents).
Repairs
Motor Private: 65–75% of claims, ~3,000 claims annually. Sharp increase in average claim cost in 2024, followed by a marginal increase in 2025. This may largely be due to Shama’s supply of parts.
Motor Commercial accounts for 45–55% of total payouts, with approximately 900 claims annually. Of these, GREENWHEELS ELECTRIC MOBILITY SOLUTIONS LTD contributed 194 claims in 2025.
Motor Commercial’s overall claim severity appears to be declining. However, when motorcycle repair claims are excluded, the 2025 average claim increases from 384,974 to 502,235, representing a 5% reduction compared to the 2024 average. This suggests that the apparent improvement is largely driven by lower-value motorcycle repair claims rather than an overall reduction in claim costs.
Excess Protector – Reinstatement Terms: The policy currently permits unlimited reinstatements of the excess protector, which may unintentionally encourage overreliance and diminish prudent risk management among insureds.
Share risk with clients by introducing limits on the availability and distribution of the excess protector.
Total Loss
Accounts for 25–30% of total claim payouts under Motor Private and Commercial.
The number of cases has been declining.
Motor Commercial 2025: Contribution rose to 40% (from 26% in 2024), driven by both number of claims and average claim amount.
The increase in total losses is the main driver of higher average cost per claim in Motor Commercial OD.
Recommendation: Investigate Total Loss cases under Motor Commercial in 2025.
Thefts
Motor Private: ~20 vehicle theft cases annually, while Motor Commercial: less than 10 cases before Watu.
Watu credit: Motor Commercial theft cases rose to 1,500 per year.
Partial thefts have minimal impact.
Windscreen
Contributes about 1.5% of total payouts in both Motor Commercial and Motor Private, made up of approximately 500 motor commercial and 1,000 motor private claims.
Average claim cost shows no major concern, with year-on-year growth within inflation thresholds.
Total payout is declining.
Claims Assessment Approach: Given the high claim frequency, we recommend continuing with desktop assessments to optimise efficiency and avoid incurring additional physical claim assessment costs.
Empanelled Part Suppliers
Empanelment of garages is currently work in progress, with a dedicated resource reviewing the onboarding process and conducting background checks on related parties for compliance and proper governance.
At the moment, about 14 garages have been vetted, with Shamas Motors Ltd still leading in supplies.
The 14 vetted garages include:
Key Observations
Motor Private – Parts Supply (Empanelled): Empanelled garages account for approximately 20% of total claim payouts in 2025 under Motor Private, indicating growing adoption of parts supply within the empanelled network.
Motor Commercial – Parts Supply (Empanelled): Empanelled garages contribute only 4% of parts supply by value, suggesting limited utilisation under Motor Commercial.
Average Claim Cost – Empanelled vs Other Garages: Empanelled garages exhibit a significantly lower average repair claim cost compared to non-empanelled garages. This warrants further investigation to determine whether the difference arises from case mix (simpler claims being referred to empanelled garages) or from genuine cost efficiencies and savings within the empanelled network.
The plot below shows the key Own Damage claim metrics.
Key Observations
Motor Private OD: Experience is primarily driven by Repairs.
Motor Commercial OD: Experience is mainly driven by Total Losses, especially now that the impact of Watu Credit is fading.
Average Cost – Total Losses (Motor Commercial): Has been increasing consistently since 2020. Despite a decrease in the number of cases, the severity of losses limits potential gains.
Average Cost – Repairs: On a decline for both Motor Private and Motor Commercial.
Watu Credit Impact: Continued effects may be observed on the Legal side under Motor Commercial.
Recommendation: Adopt this monitoring framework regularly to prevent adverse schemes like Watu Credit in the future.
Legal Services
Purpose: Legal service providers are engaged to defend our policyholders or pursue recoveries. Our data does not distinguish between these two activities.
Cost vs. Outcome: A successful defense results in no claim payout (case dismissed), so calculating total service provider expense per shilling of claim does not accurately reflect the cost of processing claims.
Investigators: Paid to assess claim potency; this cost applies to most or all legal cases.
Court Filing Costs (Recovery assignments): Filing a claim in court costs KES 70–100K, whether pursuing recovery or responding to summons. These amounts are currently included in service provider fees, which are regulated by the LSK act.
Third-Party Claim Payment Refunds: Where empanelled lawyers settle claims on our behalf and later seek reimbursement, legal fees may appear elevated. In this analysis, service provider fees are capped at KES 300K, with any excess classified as a claim.
Multiple claimants in one claim number: An advocate may be engaged to defend cases relating to one claim even though there are several claimants. In that case, legal fee reviewed per claim number may appear to be unreasonably high.
Only a few doctors such as Dr. Malik are engaged for court appearances, and these will usually cost around KES 20,000.
Court appearance for doctors requires professionalism and familiarity with the court environment when giving a professional opinion.
Future Tracking: To monitor out-of-court settlements (legal claims paid without the involvement of our empanelled lawyers).
Own Damage Service Provider Fees - Zayan: Paid for towing services, with fees dependent on the location of the salvage. - Assessments/Investigations in far away towns such as Mandera County will attract additional cost reimbursements for logistics expenses and may cost upwards of KES 10,000 – 15,000. This may adversely affect providers such as xenon with countrywide presence.
The next scatter graph shows the key service provider metrics for each service provider.
Further Analysis Required
Service provider fees (Legal Payments): Extract the fee component using the withholding tax entries booked per claim.
Legal costs breakdown: Split legal costs into claim defense versus recovery costs. Since both defense and recovery is probabilistic, it would be valuable to identify successful and unsuccessful recoveries.