Banks are giving mainstream insurance companies a run for their money as the bancassurance business grows its overall market share to 10 per cent, latest industry data shows, shaking the industry.
The growth has been driven by insuring of vehicles, loans and mortgages with continued investment in underwriting business by lenders now seen to shake the industry.
A study by the Association of Kenya Insurers (AKI) and Research 8020 released yesterday also shows motor, fire, medical and theft insurance have also emerged as key contributors to the growth of non-life insurance under bancassurance.
This is where banks sell insurance products in addition to their core services, a business that Kenyan banks have diversified into over the years to among others, increase their income streams and offer customers a wider range of products.
Lenders made an entry into the insurance sector in 2004 when the Central Bank of Kenya licensed the then Commercial Bank of Africa (CBA), now NCBA after a merger with NIC Group in 2019, to sell insurance products.
Notably, bancassurance has maintained a stable market presence with almost all top tier banks tapping into the segment, consistently capturing a sizable share of the overall insurance market, with gross written premiums closing at Sh34.9 billion last year up from Sh30.8 billion in 2022.
Motor insurance offered by banks commanded 58.6 per cent share in 2023, capitalising on the increasing demand for comprehensive vehicle coverage, driven by a rise in the number of vehicles on the roads.
Banks’ financial muscles have seen them dominate covers which come with asset financing, as they continue to eat into the insurance sector market whose gross written premiums totaled Sh361.4 billion last year, up from Sh312.1 billion in 2022.
Of the written premiums in bancassurance, credit and mortgage accounted for Sh10.4 billion followed by individual life Sh4.8 billion, with notable underwriting business in group life and last expense.
The continued investment in insurance business by banks is now seen as a major driver of growth in the sector, with their dominance expected to trigger mergers for small insurance companies.
According to AKI, banks are taking advantage of their huge customer database to drive insurance business.
The association projects that bancassurance could be the biggest distribution channel for insurance in the country in the next five to 10 years, a move that could see small stand-alone insurance firms struggle where some firms are yet to comply with the minimal capital requirements.
Players in general insurance are required to have a core capital of Sh600 million while life insurance requires a minimum of Sh400 million, bringing the total to Sh1 billion for those offering both.
“They (small insurance companies)
should be merging even as at now to
build up capital and become financially stable. This will enable them
withstand the strong competition
brought by bancassurance,” AKI
chief executive Tom Gichuhi said.
