The document is a report submitted by Isaac Murambi Muchika on his 3-month industrial attachment at Africa Merchant Assurance Company Limited (AMACO). The report provides an overview of AMACO, including that it is a leading general insurance company in Kenya established in 2000. It also describes the student's responsibilities in the Underwriting department, including policy scheduling, issuance of certificates, documentation, and preparation of quotations. The report evaluates the student's experience at AMACO and provides recommendations to improve the company's operations.

1. A REPORT ON INDUSTRIAL ATTACHMENT AT AFRICA MERCHANT
ASSURANCE COMPANY LIMITED.
SCHOOL OF BIOLOGICAL AND PHYSICAL SCIENCES
DEPARTMENT OF MATHEMATICS AND STATISTICS
PRESENTED BY:
ISAAC MURAMBI MUCHIKA
REG. NO: ACS/050/12
BSc (Actuarial Science), Dip (Insurance AIIK), CSIA
May, 2015

2. DECLARATION
I do hereby declare without any reasonable doubt that this Industrial attachment Report is my
own original work and has never been presented before to the Faculty of Science for the award
of Bachelor’s Degree in Actuarial Science of Moi University. No part of this report shall
therefore be duplicated without my prior consent and that of the Company.
NAME ................................................................................. REG NO. ...............................
SIGNATURE ...................................................................... DATE ........................................
AFRICA MERCHANT ASSURANCE COMPANY
INDUSTRIAL SUPERVISOR .................................................................................................
TITLE HELD ..........................................................................................................................
SIGNATURE ..................................... DATE ........................... STAMP .................................
OFFICIAL MOI UNIVERSITY USE ONLY

3. PREFACE
The field of insurance has always been a source of inspiration for me during my entire academic
career. To work in an insurance, to acquaint with its working mechanism was always a point of
interest to me and God gave me a golden opportunity to complete my internship at Africa
Merchant Assurance Company, one of the leading general insurance company in Kenya and well
known in the regional market for its good reputation. I had a general idea about the insurance,
but once I practically started the internship at AMACO, I realized the importance and
significance of general insurance for the development of an economy. To adjust myself in such a
large commercial organization was not an easy task, but through guided training, practice,
supervision and evaluation I learned a lot about the insurance business operation. This has
expanded my vision in the insurance sector, which in turn enabled me to make an appraisal of the
economic situation of our country. This report is however a thorough essence of my rigorous
studies which I went through in a period of three months commencing 2nd
February 2015 to 2nd
May 2015 in a reputable insurance company. I have exclusively studied and observed the
operations/ functioning of the company and tried my very best to acquaint myself with all the
dimensions of insurance especially underwriting practice. The purpose of this report is to
evaluate the performance of AMACO in diversified avenues and give concrete recommendation
for further improvement. Although the operation and functioning is satisfactory, the path to
ultimate success is still full of threats and hurdles. It was a great experience to work with
AMACO and contribute handsomely in the process of appraising its pros and cons and I feel to
be a significant part and parcel of the company. I am grateful to all those who took part in
training and guiding me in one-way or the other that has culminated in the preparation and
compilation of this report.

4. ACKNOWLEDGEMENT
This attachment was successful due to the cooperation and support of a number of people who
have enabled me gain much more than what the scholastic or industrial aspects of the program
could have given.
First of all, I would like to appreciate the Almighty God for the charitable time and strength,
aptitude and persistence for magnificently completing my field attachment and report
compilation, I would have done nothing if it was not for HIS willpower.
I wish to acknowledge my industrial supervisor; Mr. Martin Mwai, the Assistant underwriting
Manager and the entire Underwriting team for enthusiastically sharing with me their experiences
in insurance. I am sincerely indebted to them for supporting and guiding me passionately
throughout the entire Underwriting training.
I wish also to extend my appreciation message to the AMACO Human Resource department and
the school supervisor from Moi University for the opportunity and availing resources required
during the attachment period.
Lastly, I would like to thank my Mum and the entire Muchika family with sincere gratitude for
their absolute financial and moral support on everything. God bless you all…
THANK YOU ALL.

5. DEDICATION
When a person does something, there must be an inspiration behind the work. I would like to
dedicate this work to my Mother and the entire family from whom I have received a Great
inspiration and boost for going through this important industrial study. In addition, I dedicate my
work to all my friends and colleagues in the insurance industry, especially AMACO from whom
I have been mentored, trained and gained insurance experiences.
AMACO ASSURANCE COMPANY LTD
The student was attached to the underwriting department of AMACO insurance company with
the guided training and supervision of the department head Mr. Mwai. His responsibilities, using
the underwriting subsystem included:
 Preparation of policy schedules for new business.
 Issuance of motor certificates to receipted policies.
 Debiting work.
 Receipting of debited policies/covers.
 Documentation of policies for Registry new businesses, extensions and renewals.
 Classification of policies into their respective class codes.
 Preparation of quotations for various insurance products in Excel worksheets.
List of abbreviations
AMACO ; Africa Merchant Assurance Company
IRA ; Insurance Regulatory Authority
AKI ; Association of Kenya Insurers
PHCF ; Policyholders’ Compensation fund
WIBA ; Work Injury Benefits Act
CAR ; Contractors All Risk
PA ; Personal Accident

6. Executive Summary
This report is compiled in partial fulfilment of the Bachelor of Science (Actuarial Science)
Degree which the Attachee is studying at Moi University, and serves to provide an overview of
what the student learnt during the attachment period at AMACO Assurance Company Ltd for the
three months’ training. This report has been prepared using the standard format that was
designed by the University for the Qualification and award of Undergraduate Honours degree of
Moi University. The sources used to write this report include; observing how Underwriting
activities are carried out by the Company, Reading through the schedules and brochures
(secondary sources), Interacting and asking different people from different departments in the
organization, experience obtained from the tasks assigned in the underwriting department and
research carried out on the internet and various insurance texts including AKI publication.
The report is actually a brief discussion of functions that are performed at AMACO Assurance
Company. AMACO was established in 2000 and is one of the major commercial Insurance
Company in Kenya. The Company is making every effort to meet the up-coming challenges
through strategic planning and making the best use of resources at its command. A professional
team of employees have been hired to serve and deliver quality customer satisfaction (service
beyond the obvious).The management has instituted major improvements in customer services
and internal systems to improve efficiency apart from rationalized branch network throughout
the country.
This report starts with the brief introduction along with the business sector of AMACO and its
future plans. The Company’s complete range of products are mentioned, Organization’s
hierarchy chart and a brief introduction of all departments in which I was attached. At the End, I
have briefly evaluated the Organization according to my learning, and concluded my views about
its operation, the last part of report gives suggestions and Recommendations for the Company’s
future.

7. TABLE OF CONTENTS
DECLARATION..........................................................................................................i
PREFACE ..............................................................................................................ii
ACKNOWLEDGEMENT............................................................................................iii
DEDICATION..............................................................................................................iv
Executive Summary Error! Bookmark not
defined..................................................................................................v
CHAPTER ONE
1.1 Purpose, Scope and Limitation
1.2 Insurance Mechanism
1.2.1 Insurance in Kenya
1.2.2 Company profile of AMACO Assurance Ltd
1.2.3 AMACO General Assurance
CHAPTER TWO
2.0 Introduction
2.1: Principle for the underwriting profession
2.2: The role of underwriters in AMACO
2.3: Activities and Experience
2.4 Challenges facing insurance underwriting

8. 2.5 Interaction with the Staff at AMACO Assurance Ltd Error! Bookmark not defined.
CHAPTER THREE Error! Bookmark not defined.
3.0. Introduction 26
3.1 CONCLUSIONS
3.2. RECOMENDATIONS
References
Appendix I: THE ORGANISATION STRUCTURE OF AMACO ASSURANCE LTD

9. CHAPTER ONE
1.0Introduction
Students of Moi University studying Bachelor’s degree courses are required to undergo an
industrial attachment program for a period of at least three month in a field relevant to their
course of study. This is an essential academic requirement set by the University’s senate for the
award of any undergraduate degree. The internship is followed by Supervision and
comprehensive report writing required to be submitted to the research and development division
(R&DD) of Moi University.
Purpose, Scope and Limitation
Purpose of the study
The Industrial Attachment program fulfils part of the requirement in pursuing the Bachelor of
Science (Actuarial Science) degree at Moi University. This report serves to summaries the
activities and experiences gained with AMACO insurance company Ltd, Nairobi. The following
are the purpose of the program;
i. To analyse insurance operations i.e. operational analysis.
ii. To make transition from school to the world of work smoothly and enhance student contacts
for job placement.
iii. To improve report writing skills.
iv. To asses interest of the learner in the occupation he/she plans to undertake.
v. To expose learner to work methods not taught at course level and provide access to products
equipment not available at college.

10. Scope and limitation of the study
During the attachment, the student was involved in underwriting of insurance products. This
report will only cover parts of the project, which were done by the student. The experience
gained during the period had helped the student fulfil the objectives of the attachment.
The emphasis of this report will be on the underwriting of insurance products done by the student
in addition to the experience, (Reception, Dispatches activities, Registry and messengerial work),
that he gained during the attachment. Certain assumptions need to be made on the reader’s level
of familiarity with underwriting concepts. An elaborate study of underwriting practice will be
made to help understand the concept.
I admit that the study attempts only those aspects, which are closely relevant to the purpose of
the report.
Methodology of the study
Primary and secondary data were used in compilation of report. Methodological tools were:
i. Primary Data:
a) Personal Observations.
b) Open discussion with insurance Personnel.
ii. Secondary Data:
a) Brochures/ Manuals of the company.
b) Annual Report
c) Journals, newspapers and books.
d) Internet.

11. 1.2 Insurance mechanism
Insurance is the equitable transfer of the risk of a loss from one entity to another in exchange for
payment. It is a form of risk management primarily used to hedge against the risk of a contingent
or uncertain loss. An insurer or insurance carrier (AMACO) is a company selling the insurance
cover. The insured or policyholder is the person or entity buying the insurance policy. The
amount of money to be charged for a certain amount of insurance coverage is called the
premium. Risk management is the practice of appraising and controlling risk which has evolved
as a discrete field of study and practice in the industry.
The transaction involves the insured assuming a guaranteed and known relatively small loss in
the form of payment to the insurer in exchange for the insurer's promise to compensate or
indemnify the insured in the case of a financial loss. The insured receives a contract called the
insurance policy document dully signed by authorized officer of the company, which details the
conditions and circumstances under which the insured will be financially compensated and the
limit of liability.
1.2.1 Insurance in Kenya
The industry operates under an umbrella body, the Association of Kenya Insurers (AKI), which
was established in 1987. Membership is open to any registered insurance company. Its main
objective is to promote prudent business practices, create awareness among the public and
accelerate the growth of insurance business in Kenya.
At the apex of the insurance sector are two reinsurance companies, the quasi-public Kenya
Reinsurance Corporation (Kenya Re) and East African Reinsurance Company. By 2010, short
and long-term underwriters were 44, of which 21 provide medical insurance. Others are 3,788
insurance agents and 158 insurance brokers.

12. Under the 2011 amendments to the Insurance Act, an insurer wishing to open a branch or a new
place of business in Kenya, or to change the location of a branch, or an existing place of
business, must apply to the Insurance Regulatory Authority for approval.
IRA now holds directors of the insurer to be jointly and severally liable for the recovery of the
assets in case of mismanagement. The Authority was also given powers to manage assets of an
insurance company in the public interest and take any other action in this regard.
1.2.2Company profile of AMACO Assurance Ltd
Africa merchant Assurance Company limited was incorporated in Kenya and licensed to transact
General insurance business in the year 2000. For more than ten years of operation, AMACO
Insurance has dependably shouldered the risks of the Kenyan people through providing insurance
services that protect you against rising health expenses and safeguard your investments.
Besides giving our customers peace of mind, we continuously work towards living up to our
commitment to safeguard the interests of individuals and businesses that transacts business with
us by paying claims promptly. Our operation is computerised to ensure delivery of the most
current and efficient services to our clients, a feature that has seen the Company enjoy
competitive advantage from rival firms in the industry. The Company is proud of its strong asset
base and unique country wide branch network ensuring top service provision to clients in the
country. The company invests its funds in government securities, fixed income instrument/ term
deposits and real estate investment to maintain its capital base
Awards and Recognition
AMACO over time has been recognised by various stakeholders and the insurance industry in
various areas of distinction. In 2012, AMACO bagged the Promoters Recognition Award in the
11th
edition of the Prestigious Financial Reporting (FIRe) Awards. The Award recognised the
exemplary accounting standards exhibited by the company’s financial reporting among
companies in the large East African Region.

13. Company vision
To be the insurer of choice in Africa
Mission statement
To provide innovative insurance solutions that guarantee financial and social security to all
stakeholders.
Corporate values (PIIT)
P- Professionalism
The company is committed to demonstrate high levels of skills and proficiency in carrying out its
tasks, processes and in its engagements with stakeholders.
I- Integrity
The company believes in being credible, fair, humble and honest while remaining resilient,
transparent and accountable in the industry it operates.
I-Innovative
The firm seeks to build a working environment that is adaptive and receptive to creative ideas,
capable of innovating appropriate products and processes to meet the changing needs of its
stakeholders.
T- Team spirit

14. Creating an environment that is full of passion and to facilitate the desire to work together in
delivering services to our clients.
Motto: service beyond the obvious
1.2.3 AMACO General Insurance
This section outlines the products that are offered by AMACO General Insurance that the student
was involved in training and transaction over the period of his attachment. As one of the
objectives of attachment, I was expected to cover the various products offered by the Company,
the associated benefits, cover limits of each products and preparation of quotation for each cover
using the appropriate rates applicable as part of the underwriting practice. These products
include;
a) Contractors All Risks
The policy is designed for contractors and it seeks to protect them against loss or damage to the
contract works, machines, plants and third party liability arising out of the execution of the
contract awarded. Premiums calculation for this cover is based on the contract price at an
appropriate rate per mill which ranges from 2 to 3.5 rate per 1,000.
Quotation illustration for contractors all risk
Section 1
Contract price 10,000,000@2/1000 = 20,000
Machines 50,000,000@1/1000*10% = 5,000
Plant 30,000,000@1/1000*10% = 3,000
Total section 1 28,000
Section 2 (third party liability)

15. Bodily injury 5,000,000@1/1000 = 5,000
Debris removal 3,000,000@1/1000 = 3,000
Total section 2 8,000
Premiums = 28,000+8,000 = 36,000 (subject to loading)
Premiums 36,000.00
Add training levy (0.2%*36,000) 72.00
Add PHCF levy (36,000*0.25%) 90.00
Add stamp duty 40.00
Total premiums charged 36,202.00
Note: PHCF stands for policyholders’ compensation fund
b) Public Liability
The cover is designed to compensate insured in respect to claims from members of the public
who may suffer losses due to negligence of the insured or that of his/her employee. It covers
damage as well as costs of claims for injury or damage to property. This cover constitutes section
2 of the contactors all risks above with the same rating.
c) Personal Accident Cover
The cover is designed to cover persons/employees from injuries sustained at their places of
employment, it serves to compensate one for the medical expenses incurred, death benefits to the
beneficiaries etc. premium calculation for this cover depends entirely on the salary/benefits the
insured is entitled annually. Limits of the cover are;
i. Death benefits
ii. Permanent total disability (PTTD)
iii. Temporary total disability (TTD)
iv. Medical benefits

16. d) Group personal cover (GPA)
It is similar to personal accident with the same benefits and rating only that the premium
obtained at PA is multiplied by the number of group members less 20% group discount.
e) Fire
It covers contents and building cost against damage caused by fire. Rating ranges from 1.5 to 5.0
per mill depending on the underwriting factors, exposure of the risk, claim history of the
proposer etc.
f) Burglary
This is a complementary product that goes hand in hand with fire (it cannot stand alone). It
covers damages caused to the contents as a result of forcible entry and exit from a building.
Rating ranges from 5.0 to 15.0 per mil of the sum insured and for the case of large value, the first
loss of sum insured which is 40% after rating is covered.
g) Work Injury Benefit Act (WIBA)
It is designed to cover domestic servants like house-help, watchman, ground men, gardeners and
drivers at their places of employment. On death of such servant, the employer is required to pay
96 months’ salary and funeral expense of 30,000. Premiums are based the earnings/ wages with
rates differing with the nature of occupation.
h) Professional Indemnity
The cover is to indemnify the insured and his employees against any claims arising out of
neglect, omission or error committed in the conduct and practice of his professional duty.

17. i) Fidelity guarantee
It offers protection to the insured for the loss suffered as a result of forgery, embezzlement,
larceny or fraudulent conversion by employees in the course of their employment. The cover
does not protect the employee who commits default within his/her duties for payment/
remuneration.
j) Motor insurance
The cover is designed for legal liability to third parties, accidental or own vehicle, fire and theft.
It is divided into three categories;
 Third party only
 Third party fire and theft
 Comprehensive insurance
k) All risk insurance
The cover seeks to protect the insured against any loss or damage to property whenever the
specified risk occurs. It is specifically designed to protect both personal or organisational goods
and items portable in nature. The cover can also be extended to fit one’s needs.
l) Travel insurance
The cover protects insured against unforeseen circumstances that occur during travel to or from
anyplace across the world. The policy covers;
 Flight cancellation or travel delay
 Medical and emergency expenses
 Loss of travel documents
 Personal accident for death and disability sustained in the course of travel
 Misdirection of luggage etc.
m) Money insurance

18. It provides cover for loss of money in transit between insured’s premises and bank or post office
or other specified occasioned by robbery, theft or fortuitous cause. It also covers loss by burglary
or house breaking while money is retained at insured’s premises in a safe.
n) Goods in transit insurance cover
It is designed to cover financial protection against loss of or damage to goods that are being
transported as part of the stated business by the proposer.
o) Marine insurance
p) Glass insurance
q) Merchant commercial cover

19. CHAPTER TWO
2.0 Introduction
UNDERWRITING
Insurance underwriting is the process of classification, rating and selection of risks. In simpler
terms, it's a risk selection process. This selection process consists of evaluating information and
resources to determine how an individual will be classified (whether a standard or substandard
risk). After this classification procedure is completed, the policy is rated in terms of the premium
that the applicant will be charged. The policy is then issued and subsequently delivered to the
purchaser by the insurer.
The underwriter's job is to use all the information gathered from numerous sources; proposal
form and inspection or valuation reports, to determine whether or not to accept a particular
application. The underwriters in AMACO normally employ sound judgment based on their
experience and the company’s guidelines (schedules and risk policies) to read beyond the basic
facts and get a true picture of the applicant’s risk
The underwriter's primary function is therefore to protect AMACO against any possible adverse
selection i.e. very poor risks and those parties who may have fraudulent intentions.
Adverse selection can be said to exist when an individual or a group of risks that are insured is
more likely than the average corresponding group to experience a loss/claim.
AMACO has a number of resources that can be called upon to provide the necessary information
to the Underwriters for the risk selection process. These sources include:
 The policy application/ proposal form,
 Inspection reports,
 The producer or insurance agent.

20. The Application/ proposal form
The application form is an absolutely crucial document because it's usually attached to and
incorporated as an integral part of the insurance contract. The proposal form takes special care
with its accuracy in the interests of both the company and the insured. The application is divided
into sections, with each designed to obtain specific types of information regarding the risk. This
document is signed by the proposer forming the insurance contract between him/her and the
insurer.
Inspection reports
To supplement the information on the application, the underwriter may order an inspection report
on the applicant from Ms Wheels Automobile Valuers and Assessors limited located at Nairobi
Railways Club-Uhuru Park, which provides financial and valuation information regarding the
risk. This data is used only to help determine the insurability of the applicant.
Underwriting in the field (Agents)
A key element in the underwriting process is the role of the insurance agent. It may even be
argued that the agent is the most integral part of the risk selection process. This is due to the fact
that they are in a position to actually see and talk to the proposed insured, to ask the questions
contained on the application and gauge the responses, and to accurately and completely record
the answers to those questions. Thus, one of the most important functions of the producer is to
oversee the completion of the insurance application. Much of the information reported on the
document becomes the basis upon which to accept or reject the proposed risk.
Key objectives of an effective underwriting policy
- Leadership of a selective business class e.g. motor insurance
- Underwriting profitability
- Brand leader
- Company of choice for businessman / common man
- Developing balanced portfolio by spreading the risk geographically and class wise.
2.1 Principles for the underwriting profession

21. The relevance of underwriting profession can be well captured by studying its guiding principle
prepared by organizations of Canadian insurance underwriters (CIU) and Association of home
office underwriters (AHOU). These principles are presented not only to set specific standards for
others to measure individual performance but also for self-guidance to all those who are striving
to practice and training to meet the responsibilities of the profession.
Going by the principles, it is the responsibility of each underwriter to:
 Act promptly while exercising sound objective and consistent judgement in making
underwriting decisions.
 Teat all underwriting information with the utmost confidentiality and use it only for the
express purpose of evaluating and classifying the risk.
 Act responsibly as an employee with scrupulous attention to the mutual trust required in
an employer-employee relationship.
 Comply with the letter and spirit of all insurance legislation and regulations particularly
as they apply to risk classification, privacy and disclosure.
 Follow established risk classification principles that differentiate fairly on the basis of
sound actuarial principles.
 Avoid any underwriting action which is in conflict to act independently and without bias.
2.1.1 The role of underwriters in AMACO insurance
1. Treaty work
Underwriters are normally involved in treaty work in AMACO, this is specifically for the
reinsurance department. Reinsurance is the financial transaction by which risk is transferred to
the reinsurance company. A treaty will specify all the details and conditions under which
Reinsurance Company will accept the transferred risk. Reinsurance Company grants automatic
capacity in case of bulky business i.e. the amount of exposure that it is willing to offer for
AMACO.
2. Product development
Product development is the heart of AMACO and therefore the involvement of underwriters in
this process is very important. They work closely with Actuarial/ entity risk department to
determine the risk profile of each risk type that the company is willing to accept. The risk profile
is determined by following precise underwriting rules, applications and pertinent exclusions for

22. pricing. This relation has seen the Elimination of psv matatu business from AMACO following
its increased exposure i.e. claims outweighs the gross premium underwritten.
3. Risk selection
Here the underwriters decide whether or not to accept a particular risk. It involves securing
factual information from the applicant, evaluating the information and deciding on the course of
action. This is typically aided by AMACO’s underwriting guidelines and exclusions.
4. Classification and Rating
Underwriters play critical role in construction of a portfolio of homogeneous risks to which rates
can be assigned through classification. The company has its own rating system that is in line
with those of the Insurance Regulatory Authority to guide underwriters in premium computation.
The theory that explains this role is based on the central limit theorem 1, commonly referred to
us law of large numbers, which basically states that a large enough number of similar risk behave
in a fashion of Gaussian distribution. A key assumption in this theorem is that risks need to be
similar or behave in a homogeneous manner. Thus AMACO can only create value by reducing
the volatility of claims if their designed portfolio consists of homogeneous risks or at least if
there is sufficiently large number of similar risks and these are treated as one portfolio. In
practice, underwriters do accept risks that have different risk profile but the acceptance is done
under different conditions like charging extra premium/ rating up the policy, applying exclusions
or waiting periods to restore the necessary risk homogeneity in the portfolio.

23. 2.2 Activities and Experience in underwriting
During the industrial training period, I was attached to the underwriting department of AMACO
insurance company with the guided training and supervision of the department head Mr. Mwai.
The main responsibilities, using the underwriting subsystem included:
 Preparation of policy schedules for all new businesses including branch policies
transacted at the head office. A policy is considered new if it is found to have a proposal
form and no renewal number is referenced, such policy need to be attached with
schedules, part of the policy document, fully inspected before filing at the registry
department.
 Documentation of policies; fully documented policy need to have receipt of premium
payment, rightful certificate for motor, debit note authorising payment and schedule for
the case of new business. Policy schedule is then inserted in its respective policy
document, franked and signed by Authorised officer to for policy document for the client.
 Debiting and receipting work; debiting is the initial underwriting process in which a risk
is incepted, premiums are computed and debit note printed to authorise payment.
Receipting involves using the debit number generated to receive debited amount at a
receipt as evidence of payment.
 Printing of certificates; this involves issuing and printing motor certificate and cover
notes to receipted policies. The certificate indicates the policy number, period of
insurance, class of insurance, limit of cover and clauses attaching to the policy.
 Quotation preparation; this involves providing the client with information regarding the
cover which includes premium payable and the limits of cover for the sake of luring the
client to procure business with us. Quotations are always prepared in a standard format
on the company’s letter head for an official gesture.
 Issuance and declaration of certificates; this involves fitting certificate to their correct
class of insurance using the underwriting subsystem before printing and issuing.

24. Certificates are always declared before fitting. Cancellation of certificate and cover notes
was also done at this point.
Other activities include;
Dispatches; this involves handling incoming and outgoing mails, classification and recording
into their respective books of entry.
Registry; classification, filing and retrieval of policy documents upon request by internal
customer. It also entails documentation of underwriting returns before filing to ensure all
required documents are well enclosed.
Customer service; processing customer enquiries, availing and guiding clients using company
resource and paying courteous attention to their calls.
Challenges facing the underwriting practice in Kenya
It should be appreciated that underwriting excellence would ensure better claims settlement,
better generation of fund for investment and would be supportive of the Company in marketing
effort. In today’s context, an underwriter has to be a specialist, a professional having knowledge
of the product and market, a good conflict manager with right skills and attitude. He has to deal
with not only the clients but the brokers also. The following however, are the key challenges
facing underwriting practice in Kenya;
1. Competition
The 43 licensed insurance companies compete for a limited market characterized by low
penetration. Kenyans' uptake of insurance cover both at corporate and personal level, remains
predominantly in the motor, fire industrial and personal accident (mainly group medical cover)
classes. This illustrates a poor attitude towards personal insurance cover in general leading to
low gross underwriting returns against the 40Million population. Low penetration of insurance in
the Kenyan market relative to other more developed markets like South Africa, is attributed to
the following factors:

25. i. A general lack of insurance knowledge and savings culture among Kenyans;
ii. Low disposable incomes for the majority of the population with close to 55% of Kenyans
living below the poverty line;
iii. A perceived credibility crisis of the industry in the eyes of the public particularly with
regard to claim settlement.
Competition has led to different pricing of insurance products by many rival firms in the market
limiting the underwriting stake controlled by AMACO.
2. PSV matatu menace
Most psv underwriters especially third party, are facing the problem of high frequency claims
that has seen some rivals companies under statutory management or closure due to unsettled
claims. The reckless driving, collusion/ fraud and lack of harmonized monitoring system are
some of the contributing factors to this problem (Kennedy Abincha). For instance;
Blue shield insurance, which was among the top 5 psv underwriters, collapsed with a deficit
of 1 billion unpaid. This has resulted to its takeover by Pan Africa insurance group. The
company is estimated to have insured about 50,000 psv matatus at the time of closure.
Invesco insurance sought a court protection of 600Million value amounting to third party
claims lodged by psv matatus during which it was put under statutory management by the
Insurance Regulatory Authority.
The increased claims experience has seen some companies run out of liquidity with AMACO
deciding not to underwrite the business unless on comprehensive cover.
The other potential underwriting challenges that the insurance industry is likely to face in the
near future may include;
- Terrorism covers i.e. coverage against illegal acts
- Environmental and pollution issues
- High tech/ high value project
- Coverage for intellectual property right
- Cyber security / liability
- Insurance as a comprehensive solution under one umbrella.
- Credit risk

26. - Performance guarantee
- Contingent business interruption
These challenges calls upon the industry to make use of the advances being made in science and
technology to better analyze the risk and have better pricing capability.
Interaction with the staff at AMACO
Employees need to interact to solve problems effectively. Avoiding disagreements just causes
more friction over time. Common sources of problems in the workplace include limited
resources such as time or materials, conflicts of interest and insufficient definition of
responsibilities. Interaction helps overcomes stereotypes and misconceptions to work enhancing
productively. Despite equal opportunity and fair hiring regulations, organizations still need to
value diversity and tolerance to improve day-to-day interactions between workers. In a highly
volatile global marketplace, successful leaders maintain their company's competitive edge by
ensuring that all employees develop skills to communicate with people from other cultures and
backgrounds. (Rieber, 1996).
During the three month period, I learnt the following benefits of staff interaction at work place
while at AMACO assurance Ltd:
Interaction Reduces Workplace Discrimination
AMACO provides employees with opportunities to share cultural traditions and participate in
role-playing exercises to practice problems solving in a non-traditional way, they become more
tolerant of others viewpoints and perceptions. Human resource and Administration helps the
organization by running training, workshops and seminars to allow people to practice these
interactions in what is referred to us “culture change program”. By recognizing their
perceptions and attitudes toward diversity, employees start to develop new ways of working that
minimizes workplace discrimination enhancing team spirit.
Interaction promotes effective training
Interaction at staff level creates a collaborative environment for career development through on
job training where employees learn from each other. This has been the most efficient method

27. used throughout my internship period that has seen my underwriting training successful.
Successful management promotes effective interaction to help employees resolve conflicts and
build a good rapport to enhance productivity.
CHAPTER THREE; EVALUATION OF THE ATTACHMENT PERIOD
3.0. Introduction
This chapter is a thorough evaluation of the three months period of training at AMACO. It gives
the challenges encountered and recommendations to the curriculum. An evaluation of the
company future is also outlined before conclusions.
3.1 challenges encountered during attachment
 Limited access to company’s system; the confidentiality and controlled access to the
underwriting subsystem through administration of access password for login limited the
practice of the concept covered during the industrial training.
 The mathematical approach of course work necessitated thorough and a lot of time in
insurance product training which delayed the practical training of the underwriting
software at the start of the program.
 The short period of attachment insurance cover procured by Moi University, was costly
in terms of renewing leading to extra expense in buying out another cover considering
that the cost was covered at school fees level.
 Limited training time; the ever busy AMACO environment exposed me to more practical
aspect than the training was scheduled, this led to early morning training hours before
business hour 8:00am.
Strength of the attachment program
AMACO insurance has offered me a golden opportunity to see Actuarial Science in a more
practical and professional way. The objectives outlined at the inception of my intern have been
met showing a sense of responsibility and dedication on part of the company in career
development. The following are however the benefits of the program;

28.  It has helped me asses the occupation of career that I plan to undertake or specialize in
future.
 The program has exposed me to the real world of work with a lot of ease to fit in than
what the course work could have given.
 It has enhanced my rapport and network with the company giving me a good opportunity
of job entry.
 The program has enabled me to train and serve clients with precision in underwriting
insurance products.
Recommendations to the curriculum
More emphasis should be put on Excel Worksheets at course work level to enable learners
perform key tasks in premium computation using rates and preparation of Quotations at the
industrial level.
The college to enter into collaborative relationships with the insurance companies in pursuit of
preparing well equipped learners for the firms. This can be well achieved through workshops
where learners, trainers and employers will have an open lecture, at least twice a semester, to
exchange and adjust to the needs of the market.
The curriculum should be designed in such a way to at least equip learners with the various
insurance products in the market, the limit of cover and the possible pricing, and loading
techniques applied.
The institution should incorporate workshop program in the syllabus to at least visit firms before
coming to an end of each academic year to enable learners access the practical concept.
Suggestions on the future operation of AMACO
The company should expand its underwriting front office service points to cut down on the
average time spent by clients in the queue. AMACO has one of the most efficient queue system
that works on the “first in first out principle” which when well expanded will see the firm
improve its customer service. The system is customer friendly and does not allow bulking.

29. To generate large volumes of business through underwriting capacity, AMACO need to bring in
more capital and free reserves to manage the claim cost. The objective of underwriting is
penetration and profit necessary for the growth of any company.
The company should consider introducing Medical class of insurance to take advantage of the
few firms in the industry underwriting the product.
AMACO should invest in aggressive marketing research to evaluate the market demand, pricing
by rival firms and new products to enable the company model the most current and well priced
product and reap from competitive advantage.
There is need for product differentiation where the bond businesses i.e. performance bond and
bid bonds needs to be eliminated from front office to be served at the back office to at least ease
the time in queuing for their considerable time. In addition to this, the number of cover notes
printers need to be increased to at least 2 to avoid congestion and possible failure of the “only
one” machine.
CONCLUSIONS
This report outlines the activities of the student in the underwriting of insurance products at
AMACO. The underwriting of insurance products gave the student experience in field of
insurance, debiting, quotation preparation etc, apart from improving the student`s skills in
creating and maintaining networks.
From field, the report concluded that high cost of premiums and inefficiency in claims settlement
are the major factors hindering the penetration of insurance in Kenya.
RECOMENDATIONS
The report recommends that insurance companies should push and market policies that provide
for both risk coverage and savings component because that what the customers prefer. The
insurance companies should also consider lowering the cost of premiums, have efficient claims
settlement processes, improve on agents’ integrity, improve on customer service, develop new
product varieties and create awareness through aggressive consumer education campaigns.

30. It would also be prudent to include the effects of inflation to the computation of premiums. Inflation
has been on the upward trend in the last five years. Premiums should reflect inflation as this gives a
complete economic outlook.
REFERENCES
Macedo. L (2009), The role of underwriter in insurance; premier series issue No.8.
Association of Kenya Insurers (2014), Insurance Industry Annual Report for 2013.
Donaldson. L (1999), Recruiting graduates into sales, Harvard University press. United States.
Kunrether, J.(2007), Ambiguity and underwriter decision process.
Everis. (2009), Risk management in Insurance business sector. United kingdom.
Kosgei, E.(2014), Letter of Introduction, AMACO publication (30th
may,2014)

31. Appendix I: THE GOVERNANCE STRUCTURE OF AMACO INSURANCE LTD
ELECT REPORT
APPOINT
APPOINT REPORT
SHAREHOLDERS
BOARD OF DIRECTORS
MANAGEMENT
Board Audit and
Risk committee
External Auditor
Internal Audit
Risk management
Function
Board strategy
and operations
committee
Board
Nominations
and
Remuneration

32. Appendix 2: premium working case for comprehensive private car
Total sum insured (TSI)...........................4,500,000@4%
Basic premium 180,000.00
Riot strike and civil commotion 11,250.00
Riot strike and terrorism 11,250.00
Windscreen 2000.00
Radio cassette 2000.00
Total 217,750.00 subject to loading
Training levy@0.2% 435.50
Policyholders’ fund@0.25% 544.38
Stamp duty 40.00
Annual premium 218,769.88