Kenya’s struggling insurance industry turns to technology for survival

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The Insurance penetration in Kenya fell from 2.7 per cent in 2017 to 2.4 per cent in 2018 despite an overall premium increase in the period.

While there was an increase in premiums from Kshs 210 billion (USD2.1 billion) in 2017 to US$ 2.16 million in 2018, the penetration in comparison to the Gross Domestics Product (GDP) shows that something needs to be done to keep the sector running.

According to Bima Intermediaries Association of Kenya (BIAK) Chairman Washington Ndegea, these results are a true reflection of the industry.

IRA fails to improve penetration of insurance

He said that they represent the audited figures from the various insurance companies in Kenya.

Ndegea said that this contrasts sharply with the unaudited figures and subsequent reports from the Insurance Regulatory Authority (IRA).

“Perhaps it’s time IRA left that work to AKI if they cannot publish results from audited figures,” he said in an opinion piece.

He adds that the results reflect the lack of investment in key areas of the industry.

Ndegea said that phantom projects by IRA have failed to improve penetration of insurance in the country by educating the public on insurance matters and getting the citizens to sign up for insurance packages.

He said that training by IRA has failed to increase the number of people interested in getting insurance making it a ‘total waste’ of resources.

Technology and expanded access to insurance services

To address the low uptake of insurance policies in Kenya, PTA Reinsurance Company, ZEP-RE is collaborating with the country’s insurance industry to aggressively embrace technology and help expand access to insurance services.

ZEP-RE Managing Director Hope Murera said that the insurance industry is ripe for innovation and the adoption of technology to achieve savings and efficiency is long overdue.

“The insurance industry the world over is undergoing disruption. Through the use of technology, the industry has an opportunity to embrace analytics further to come up with customized products that meet user requirements, new product development to expand and grow the pie as well as improve efficiencies that will lower distribution costs making insurance more accessible to all,” she adds.

Murera said that the insurance industry the world over has been slower to innovate compared to the rest of the financial sector which has motivated ZEP-RE to champion innovation at the industry level.

Speaking at an insuretech forum held in Nairobi, she said that the forums held previously in Nairobi, Harare and Lagos were meant to create awareness around the opportunities digital disruption presents and how the industry should prepare itself to harness the said opportunities.

To increase insurance penetration in the Common Market for Eastern and Southern Africa (COMESA) region and the continent at large, Murera said that ZEP-RE aims to use the different facets of technology to deliver its mandate.

Combating insurance uptake decline

According to the Kenya Association of Insurers (AKI) CEO, Tom Gichuhi, the sector should take innovation seriously to stave off the current decline.

“We have seen this industry going down but we don’t seem to know what to do about it. We seem to live on hope that tomorrow will be better. The sector needs to think seriously about innovation and do it collaboratively,” Gichuhi said.

According Kenya Association of Insurers (AKI) industry report for 2018, insurance penetration in Kenya dropped to 2.43 per cent of the Gross Domestic Product (GDP). This left the industry at the lowest in more than a decade.

Conversely, the drop in penetration resulted into a 61.56 per cent drop in net profits from US$ 9.21 million to US$ 3.54 million.

To combat this, “We want to challenge the industry leadership to embrace and adapt to the digital evolution,” Murera said.

ZEP-RE’s Chief Information Officer Alexio Manyonde said they have mobilised a number of start-ups and innovators in the insurance space.

“Our ultimate goal is to pair tech innovators with insurance service providers as a means of starting the journey of development, mentorship, partnerships and joint development initiatives with the ultimate goal of, actualising and commercialising of ideas,” Manyonde added.

Insurance inclusivity

ZEP-RE Chairman William Erio who spoke at the same forum said that moral hazards such as fraud were impacting the industry’s growth.

He assured that ZEP-RE was willing to support efforts to promote insurance inclusivity and financial deepening in the region.

“On the positive, we are seeing a strong sense of innovation coming into our products and service offering. The industry is also witnessing disruption in the distribution mechanisms with technology starting to play a central role. We are willing to support initiatives that will ease access to insurance especially by the low- middle income population,” Erio said.

Jubilee insurance Chief Executive Julius Kipng’etich urged the industry players to work with innovators, learn from non-direct competitors and remodel their businesses by moving from selling to marketing.

“Our brothers in the banking sector have learnt something that we in the insurance sector haven’t. We need to start working closely with innovators and thinkers – these are the people who create meaningful disruption in the insurance industry,” Kipng’etich said.

Read: Kenya’s gambling firms on tenterhooks as licencing demands become clear, Why Kenya’s insurance sector is “rotten”

I have 10 years of experience in multimedia journalism and I use the skills I have gained over this time to meet and ensure goal-surpassing editorial performance. Africa is my business and development on the continent is my heartbeat. Do you have a development story that has to be told? Reach me at njenga.h@theexchange.africa and we can showcase Africa together.

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