Insurance industry players have projected an increase in the uptake of covers in 2024, driven by a better economic environment.
This is after the sector suffered substantial beating this year, from the ever-increasing taxes that affected Kenyans' capacity to buy health and other insurance covers.
According to Britam, one of the leading industry players, the industry holds a quite positive future come next year, on the back of the easing inflation that hit 6.8 per cent in November from the highs of nine during the year.
Britam's CEO and principal officer of general insurance Jackson Theuri, while speaking to The Star, said the landscape will also be characterised with several other driving factors that will clearly come into play next year.
“These include emerging risks such as cybercrime and the increasing need for health alternatives,” Theuri said.
“However, we should not weigh down the dynamics of inflation, as its increase would erode the purchasing power of individuals and organisations. This could be a factor that dampens the sector’s prospects next year.”
CIC’s life assurance managing director Meshack Miyogo, concurred with Britam’s projection of a promising industry prospect.
“Next year’s business landscape looks promising, if the economic environment spans out well. Therefore, there is need for players to align budget solutions for insurance products to match the reduced disposable incomes of consumers to promote more uptake,” Miyogo said.
“This could be a positive step for the sector that has performed proportionately fair this year based on our current performance, and the industry’s overall amidst the tough economic environment especially for salaried markets and stable corporates.”
He added that the environment has also been tough for the business people, envisaged in the rise of surrenders and cancellation of life insurance policies across various products.
The official highlights the general economic growth as one of the major contributors to increased insurance uptake in the country in coming years.
"Currently, the macroeconomic environment is faced with uncertainty that has resulted in rising cost of living and currency depreciation, weakening the purchasing power of consumers," Miyogo said.
"As we head into next year, we are hopeful that the economic environment will stabilise to allow individuals and businesses have higher disposable incomes, which will make it more feasible for them to allocate resources towards insurance coverage.”
He also stressed the need for consumer education, as the efforts to educate Kenyans about the importance of insurance and its benefits will significantly influence uptake.
Enhancement of distribution channels through banks and Saccos, as well as through affiliate groups was also noted to be key in supporting growth of insurance in coming years, more so in retail solutions.
Accelerated digitisation of the sector, especially mobile technology, according to Miyogo could also facilitate easier access to insurance services.
This is because mobile-based insurance solutions and online platforms will make it more convenient for people to purchase and manage their insurance policies.
CIC also says embracing more and fostering micro-insurance and inclusive products could be critical in driving up uptake.
Micro-insurance products cater to the needs of low-income individuals and MSMEs, hence will play a key role in expanding insurance coverage to traditionally underserved populations, the firm says in part.
“The prevailing climate crisis is also growing awareness on its probable impact. Hopefully, this will drive interest in insurance products that provide coverage against weather-related risks, such as crop insurance for farmers.”
A section of insurance agents under the Association of Kenya Professional Insurance Agents, last month noted that the increased taxes this year has put the penetration rate at the continued decreasing trend to stand at 2.43.
Penetration rate is the ratio of gross direct insurance premiums to GDP.
“Kenyans have been pushed to the wall by the economic situation such that the first thing they strike off their list of priorities is insurance,” said Clifford Ochieng, the association chairman.
He added that the country’s penetration rate has been below the global averages for the longest, indicating a large, uninsured customer base.
At 2.43 per cent, Kenya has the third lowest insurance penetration rate in sub-Saharan Africa, with South Africa leading at 17 per cent.
“This is because most of Kenya’s population perceive insurance as a 'nice-to-have/easy to discard' product rather than one that is essential,” Ochieng said.
Nevertheless, the sector's end of year report by Insurance Regulatory Authority (IRA) shows the speed of uptake was constrained by high inflation that saw families prioritise the basic needs.
According to the report, the penetration in 2022 however increased to 2.29 per cent compared to 2.25 per cent in 2021.
Insurance density, which is the ratio of gross direct insurance premium to total population, increased from Sh5, 442 in 2021 to Sh6, 061 in 2022 indicating an increase in spending on insurance.
"The insurance industry in Kenya experienced growth in 2022 as a result of economic recovery from the effects of Covid-19," the IRA report says.
In 2022, the industry recorded Sh310.27 billion in gross premium compared to Sh273.7 billion in 2021, translating to a growth of 13.4 per cent (5.3 per cent in real terms).
Kenya is ranked fourth in Africa in terms of gross premium income after South Africa, Morocco and Egypt.
During the period, the industry net profit increased significantly by 70.2 per cent from Sh8.65 billion to Sh14.72 billion.
Long term insurance business grew by 14 per cent (5.9 per cent in real terms) to Sh140.95 billion in 2022 compared to Sh123.69 billion in 2021.
General insurance business grew by 12.9 per cent (4.8 per cent in real terms) to Sh169.32 billion in 2022 compared to Sh150.02 billion in 2021.
The segment still dominates the industry accounting for 54.6 per cent of total premium.
The industry total assets increased by 12.5 per cent to Sh956.87 billion in 2022 from Sh850.51 billion the previous year.
The industry investments increased by 13.7 per cent from Sh733.46 billion in 2021 to Sh833.72 billion as at the end of the year under review.
The investments were mainly composed of government securities at 71.4 per cent or Sh595.64 billion.