The Kenyan market is finding innovative ways to overcome low insurance penetration
Non-admitted insurance is not permitted in Kenya and brokers have to be locally licensed to conduct business there. The Insurance Act states that no insurer, broker, agent or other person can directly or indirectly place any primary insurance business in Kenya with an insurer not registered under the Act without the prior approval of the Commissioner. An application to the insurance commission can be made in cases where cover is not locally available or if the capacity of the market is too low. “There are some non-admitted covers placed outside. But it’s the exception rather than the rule,” says Stitt. And if non-admitted insurance is placed, he says it is generally through a fronting arrangement, which must also receive prior approval from the commissioner.
There are 45 registered insurance companies in Kenya, according to the IRA. But Stitt says relatively few of these are foreign-based.Foreign-based brokerages, however, have a greater presence. Aon is represented in the country and in 2011 Marsh also made an investment. “Whereas Marsh previously, didn’t have an awful lot of representation (other than correspondent arrangements) in Sub-Saharan Africa except for the major markets, now they have extended their reach through the acquisition of [South Africa-based] Alexander Forbes.”
According to the IRA 2010 insurance industry report, there were 161 licensed broker firms in the country in 2010. Though there is no official data available, Stitt estimates that 80% of non-life business is placed through the broker channel. Banks engaged in bancassurance are required to establish a subsidiary insurance agency. The products sold via this channel are restricted to individual life products and non-life insurance products for individual and small/medium sized enterprises. The IRA reviews and approves all arrangements between the banks and insurance companies.
In addition to the country’s regulatory improvement, the Kenyan insurance market has experienced healthy levels of growth since 2001. According to the IRA, gross direct premium income increased by 22% (USD terms) between 2009 and 2010, the latest year from which data is available.
Though the market is growing, Stitt says insurance penetration is still an issue. “Only a very small proportion of the population have anything to do with insurance whatsoever,” says Stitt. As many people in Kenya live on a subsistence level, traditional insurance is often not viable. “What the Kenyans have been very good at doing is thinking of innovative ways to try and tap the market,” says Stitt. One such way is through microinsurance. Stitt gives the example of M-Pesa, a mobile phone money transfer service that has become quite popular in the country. “A lot of African people now, no matter what their income status, have a mobile phone,” says Stitt. And through M-Pesa, Kenyans can pay microinsurance premiums very easily. “What it does is facilitate payment of very small amounts of premium on a daily basis, monthly basis—wherever they choose—and in areas where insurers don’t have any representation.”
Takaful, the Sharia-compliant insurance model, is also experiencing growth in the country. “It’s starting to take off in quite a significant way, considering it had a base of zero,” says Stitt. “That’s certainly what one’s got to keep one’s eye on in Kenya, because there’s a reasonable market there for them. There’s a significant Muslim population, particularly on the coast, especially around Mombasa.”
Insurance Snapshot – Kenya
- 45 insurance companies
- US $970 million in total market premium (non-life and healthcare) in 2010
- Examples of mandatory coverages for businesses: motor third party liability in respect to bodily injury, aviation third party liability, oil pollution by vessels in the Kenyan waters, and professional indemnity cover for insurance brokers.
Copyright 2012 Rogers Publishing Ltd. This article first appeared in the July/August 2012 edition of Canadian Insurance Top Broker magazine.