Old Mutual's profit recovery reveals what Kenya's insurance price competition is really costing
Kenya’s insurance market is facing a difficult question: why are insurance companies undercutting prices in Kenya when the same industry is expected to deliver faster claims, better service and stronger customer trust?
Old Mutual Holdings CEO Arthur Oginga argues that lower prices are not inherently harmful, provided they come from genuine efficiency. The problem starts when insurers cut premiums below sustainable levels simply to retain or win customers, leaving them with too little margin to honour the promise at the heart of insurance.
For Old Mutual, that calculation has already produced an uncomfortable decision. The group has deliberately allowed some poorly performing business to leave its books rather than continue writing accounts that were generating losses.
Old Mutual accepts lost business to repair underwriting
Oginga says Old Mutual went through its insurance portfolio on a case-by-case basis and repriced business that had not been generating adequate returns. Some customers considered the revised prices too high and moved to other insurers, leaving the group’s top line broadly flat.
Management was willing to accept that outcome because retaining those accounts would have meant continuing to lose money. That is an important distinction in a market where premium growth can sometimes receive more attention than the quality of the underlying business.
The results provide some evidence that the approach is working. Old Mutual’s underwriting margin, which had remained negative for the previous three years, reached 2.8% by June. Pricing remediation was one contributor, alongside supplier rationalisation and tighter management of costs in the medical business.
The company has been negotiating with pharmaceutical suppliers over the cost of medicines, particularly for chronic disease patients, while also promoting a pharmacy-first model that directs appropriate cases to pharmacies instead of hospitals. Those interventions may appear operationally small compared with premium pricing, but they affect the cost base that ultimately determines whether an insurance portfolio is profitable.
The problem with a price war goes beyond margins
Oginga’s argument on insurance price undercutting is more nuanced than a call for insurers to charge more. Lower prices can benefit customers when they reflect genuine efficiencies, better technology, stronger procurement or a more efficient operating model.
The danger comes when price becomes the easiest way to win business in a market where products are difficult for consumers to distinguish. Kenya’s insurance industry is fragmented, and many products can look similar from the customer’s perspective. That leaves premiums as a readily visible competitive tool, even when the price being offered does not adequately reflect the risk being taken.
The consequences can appear much later. An insurer that consistently prices business too aggressively may have less room to absorb claims costs, fraud, inflation in medical expenses or operational inefficiencies. Customers may then encounter slower service or more difficult claims processes, which can damage confidence in the industry.
Insurance ultimately rests on a promise. A customer pays today in exchange for the expectation that the insurer will respond when a covered loss occurs. If competition produces prices that undermine the capacity to fulfil that promise, the apparent saving at the point of purchase can become expensive elsewhere.
Fraud makes sustainable pricing harder
Fraud adds another layer to the pricing problem because every fraudulent claim or inflated loss introduces a cost into the insurance system.
Old Mutual says its efforts to tackle fraud produced significant results in the first half of the year. Confirmed fraud losses fell by 69%, external fraud losses declined by 90%, while the group says it prevented more than KSh60 million in attempted fraud.
Oginga wants other insurers to publish comparable information so that the industry can have a more open discussion about the scale of the problem. His reasoning is straightforward: fraud affects shareholders through losses, but customers ultimately have an interest in the problem because the economics of fraud can feed into the cost of insurance.
The challenge is to control fraud without creating another source of friction for legitimate customers. An insurer that becomes too aggressive in challenging claims can reduce leakage while damaging the very trust it needs to build. Fraud controls therefore have to be accurate as well as effective.
AI is becoming part of the underwriting economics
That is where Old Mutual’s investment in artificial intelligence becomes particularly relevant. The group says AI is now embedded in its medical business, where it is being used to process claims faster, identify exceptions and flag cases for further fraud review.
Old Mutual has six AI use cases operating at scale and says they have delivered just under KSh400 million in value this year. The company is also using AI to understand customer needs, personalise engagement and provide insights to its teams.
The significance is less about the technology itself than where it is being applied. Faster claims processing can reduce administrative costs. Better detection can limit fraud losses. More accurate analysis can improve decision-making around risk. Each of those areas has a bearing on the economics behind an insurance premium.
Other insurers in Kenya are pursuing similar applications. AI-based motor claims systems, for example, are being used to assess vehicle damage and accelerate the handling of eligible claims. The attraction is clear: if technology can reduce the cost and time required to process a claim without compromising accuracy, insurers have another route to efficiency that does not depend on simply charging customers more.
There is, however, a limit to what automation can solve. Insurance customers do not experience an algorithm; they experience whether a claim is handled fairly, whether someone explains a decision and whether payment arrives when it is needed. Technology has to improve that experience rather than simply make the insurer’s internal processes cheaper.
The bigger test is whether efficiency can replace price cutting
This is where Old Mutual’s strategy becomes relevant to the wider insurance market. If insurers can reduce fraud, negotiate supplier costs, improve claims administration and price risk more accurately, they can generate savings without simply squeezing premiums.
That creates a healthier basis for competition. One insurer may be able to offer a lower price because it has better claims processes or lower leakage, while another may command a higher premium because it offers stronger service or a more specialised product. In both cases, the price has a connection to the value and risk being carried.
The alternative is a market where competitors continually chase each other’s prices, even when the underlying economics do not support them. That can make insurance appear cheaper in the short term while leaving insurers with weaker underwriting results and customers with a poorer experience.
Old Mutual’s decision to let some business go suggests management is prepared to sacrifice volume where the numbers do not work. The company’s challenge now is to prove that the combination of disciplined pricing, cost controls, fraud management and technology can produce durable returns without weakening customer confidence.
Faulu faces a similar digital economics problem
The same thinking extends beyond Old Mutual’s insurance operations. The group has injected KSh1.2 billion into Faulu Microfinance Bank as it attempts to compete in a lending market crowded by commercial banks and digital lenders.
Faulu has completed implementation of a new core banking system alongside a digital platform, with plans to expand beyond its traditional concentration on county staff and lend more broadly to government employees while building its digital lending business.
That is another example of the group’s attempt to use technology and operational changes to alter the economics of a financial-services business. In microfinance, as in insurance, competing purely on price is difficult when the cost of risk, distribution and compliance remains high.
Property disposals remain part of the wider portfolio cleanup
Old Mutual is also progressing with the disposal of some real estate holdings. Oginga says the group is in discussions with potential buyers for its tower and is reviewing offers for other properties, including in Uganda.
Those transactions remain subject to completion, and Oginga is careful to distinguish discussions and offers from money that can actually be recognised. The group expects more progress in the coming months, with a target of closing some transactions by the middle of next year.
South Sudan presents a different challenge. Old Mutual plans to exit the market, but the difficult operating environment and the size of its property make finding a buyer harder. The building is being maintained by a property manager, and some staff are expected to remain after the operating business exits to handle property-related responsibilities and the liquidation process.
The insurance industry’s pricing problem will require better competition
The central issue for Kenya’s insurers is therefore not whether premiums should be lower or higher. It is whether prices accurately reflect the cost and risk of providing cover.
Customers should benefit when insurers find ways to operate more efficiently. But those gains have to come from better underwriting, procurement, technology, fraud prevention and claims management rather than from stripping away the margin needed to serve policyholders properly.
Old Mutual’s experience offers a practical illustration. The company allowed some business to leave, accepted a flat top line and concentrated on repairing the economics of the portfolio. Its improved underwriting margin, fraud-control results and AI investments suggest that profitability can be rebuilt through several levers at once.
The harder task for the industry is turning those lessons into a more sustainable form of competition. If insurers can make their products cheaper because they have genuinely become more efficient, customers win. If they simply make them cheaper by accepting losses today, the cost eventually has to surface somewhere.
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