East Africa’s life insurance business is experiencing an upward growth trend fuelled by the increasing demand for life products among the middle class.
According to a survey done by Deloitte, the Middle class is the largest class for the life insurance business while the motor and medical business classes are among the most loss-making businesses. It suggested that insurers look into other emerging business classes that have the potential for growth for them to diversify their business.
According to the survey group, life faces slower growth compared to other business classes within the life insurance mostly due to price wars that have been prevalent among the industry players.
The rising costs of fraud give the insurers the challenge of being unable to adequately price risks which have led to deteriorated returns to equity.
It is estimated that fraud accounts of the total cost of insurance premiums for Kenya are 25 per cent, Tanzania at 33 per cent, 1o per cent in Uganda and 5 per cent in Rwanda.
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According to the report, in the last five years, Kenya’s life insurance market has experienced growth both in the level of direct premiums and the equity held by industry stakeholders. It indicates that demand for life insurance products has risen leading to an increase of life insurance premiums.
In Tanzania from 2012 to 2017, there has been a persistent positive year on year growth in gross written premiums in the life insurance business. The report further notes that individual life constitutes a larger proportion of the overall life insurance premiums.
While in Uganda, increased demand for life insurance products by the middle-income class has boosted the life insurance business to grow faster than its economy.
According to the report, in the last three years, individual life is the fastest growing business class while deposit administration and group life experience slower growth than the combined life business.
Pensions Act that is yet to be liberalised in Uganda has slowed group business compared to Tanzania and Kenya.
The report notes Uganda’s general insurance market that is experiencing low growth and low profitability, with Britam and Sanlam General being the fastest growing players in the market.
While insurers in the region have experienced better times than their financial performance in recent years, the reports note that competition and declining margins pose greater risks for future growth.
