Mistrust and fraud linked to insurance reach decline

Insurance penetration in the country declined by last year attributed to the high cost of premium, fraud, mistrust and ignorance by Kenyans.

The latest annual report by the Insurance Regulatory Authority (IRA) shows the reach slightly dipped from 2.71 per cent in 2016 to 2.68 per cent last year.

“The industry contributes to the economy by providing financial security, mobilising savings and promoting direct and indirect investments. The gross domestic product (GDP) expanded by 4.9 per cent in 2017 while insurance penetration reduced,” IRA’s report says.

An earlier annual industry report by the Association of Kenya Insurers (AKI) had shown that the overall insurance penetration had also declined to 2.71 per cent in 2017 from 2.75 per cent in 2016.

The country’s insurance penetration rate which is the ratio of Gross Direct Insurance Premiums to GDP, was relatively low compared to the world’s average of 6.1 per cent and three per cent for Africa.

Players in the industry have said the penetration rate is not growing because of the high cost since premiums are not affordable to the majority of the population.

Fraud in the industry is also making insurance unattractive to newcomers, as well as trust within the industry which is considered to be very low. Poor fidelity has been as a result of claims not being paid on time, service providers not getting their invoices honoured and sales agents not receiving their commissions on time or at all.

There are further claims that weak regulations have seen bankrupt insurance companies continue to operate despite measures taken to improve the industry.

Further, a huge number of Kenyans do not value insurance with the regulator expected to adopt a multichannel approach to consumer education to reach various audiences.

IRA acting chief executive Godfrey Kiptum said in 2017 the authority continued to monitor the implementation of the Treating Customer Fairly framework as part of the regulator’s consumer protection strategy.

“The authority is continuously engaging industry stakeholders’ in order to address the ever pressing concern of delayed claims settlement,” said Mr Kiptum.

The report shows that in 2017 the country’s insurance sector remained relatively stable and resilient.

During the year, the industry recorded a growth of 6.3 per cent to hit Sh209 billion in premium from Sh196.6 billion posted previous year.