Report paints an optimistic outlook for Kenya’s insurance sector
Sponsored by Association of Kenya Insurers
What you need to know:
Kenya’s insurance industry comprises 56 insurers, five re-insurers, 220 brokers, 10,471 agents (including 26 bancassurance agents), 35 medical cover providers, 138 motor assessors, 144 investigators, 33 surveyors, 31 loss adjusters, and eight claims settling agents.
By Evans Ongwae
On March 10, 2023, Kenya’s insurance industry leaders celebrated high-performing sales agents against the backdrop of a receding Covid-19 pandemic but mounting inflation.
Prior to the AKI Awards 2022, the Association of Kenya Insurers (AKI) chairman, James Oyugi, had highlighted the tough business environment that insurance agents had braved to excel in delivering products and services to their clients.
The challenging operating environment notwithstanding, Government reports show that the insurance industry is generally stable and has growth opportunities. The July 2022 edition of the Kenya Financial Sector Stability Report, published by the Central Bank of Kenya (CBK), states that “the sector outlook remains positive in terms of growth, stability and resilience”.
The report goes on: “As the economy recovers, insurers see opportunities to produce innovative and value-based products meeting consumer needs.”
The stability report contains CBK’s assessment of the financial system stability in compliance with the CBK Act Section 4(2) and the Financial Sector Regulators Memorandum of Understanding (MoU).
Financial stability fosters the development of a vibrant and inclusive financial system that enables Kenya to meet its national development aspirations. The report provides an assessment of the vulnerabilities and resilience of the financial system during the period starting in January 2019 and ending in June 2020.
The country’s insurance industry comprises 56 insurers, five re-insurers, 220 brokers, 10,471 agents (including 26 bancassurance agents), 35 medical cover providers, 138 motor assessors, 144 investigators, 33 surveyors, 31 loss adjusters, and eight claims settling agents.
There are two types of insurance businesses, namely long-term and general insurance. The general insurance business accounted for 63 percent of the total insurance premiums in 2020, and 56 percent of the total premium income in 2021.
The CBK report shows that the insurance penetration ratio, measured by premiums paid to GDP, remained very low, at 2.4 percent in 2019, similar to 2018. The global average is 7.2 percent.
“While a number of measures have been taken to strengthen oversight and promote uptake of insurance products, there are a lot of headwinds,” states the report.
An example is the emerging trend in which the insurance risk (actual claims and benefits) exceeds the carrying amount of insurance liabilities. This, observes the CBK report, is explained by poor insurance product design, pricing, underwriting, and reinsurance arrangements, as well as governance weaknesses. The sector’s combined ratio was 101.3 percent as at December 2020, higher than 100 percent, indicating increased risk for the general insurance business.
CBK notes that the Insurance Regulatory Authority (IRA) has enhanced surveillance and taken measures to address existing challenges to improve the sector’s performance. This is complemented by the rapid adoption of technology and digital platforms, and innovative distribution channels as well as raising risk awareness.
Click here for a complete supplement on AKI Awards 2022 and more stories about Kenya's insurance industry.