Kenya:Digitisation,microinsurance open up opportunities for insurers

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Companies offering InsurTech services such as mobile claims and policy payment services and microinsurance companies offering low-cost products such as funeral and livestock insurance are most likely to succeed in the Kenyan market, says the global professional services firm KPMG.

In a report, KPMG notes that until recently, most insurers have heavily relied on face-to-face distribution and have legacy systems that do not accommodate the changing needs of consumers.

In a world where consumers are clued up on technology and prefer to have their world revolve around their smartphones, there is an opportunity for insurers to digitise customer engagement through software applications. Increasingly, Kenyan insurers are following suit and offering self-service options through smartphone technology and only facilitating interaction with an agent when the client needs advice.

Opportunities for insurers also lie in prioritising the development of microinsurance products such as livestock and crop insurance. These would appeal to a large portion of the population in Kenya as much of the population works in the agriculture sector. Heavy rains in Kenya regularly cause floods destroying crops, farmland and property and food insecurity is exacerbated by locust invasions which devastate the agricultural industry and continue the cycle of poverty.

However, with most insurers updating their policies to exclude catastrophic events and the impact of COVID-19 and business interruption, local consumers’ distrust of insurers continues to increase.

Furthermore, the KPMG report reads, “Like many countries in Africa, Kenya is faced with high volumes of fraud and corruption and the insurance industry is not any different. It is estimated that 25% of claims costs of insurers in Kenya are a result of fraudulent claims.”

In addition, in recent years, Kenya has seen an increase in cyber attack cases with 29% of corporate users experiencing malware attacks in just the first half of 2021. This calls for more effort and investment to be put into cyber security

Nevertheless, KPMG says that improving Kenya’s socio-economic status will aid in raising the insurance penetration levels which have remained for a long time below global averages which indicates a large, uninsured customer base,

At 3%, Kenya has the third-lowest insurance penetration rate in Sub-Saharan Africa with South Africa leading at 17%. This is due to most of Kenya’s population perceiving insurance as a “nice-to-have/easy to discard” product rather than one that is essential.

There are 58 insurers and reinsurers in Kenya and the market is dominated by CIC, Jubilee, Britam, ICEA, Lion General and APA Insurance. General insurance dominates the industry, accounting for 60% of industry gross written premiums.

Despite the low insurance penetration rate, the Kenyan government has been proactive when it comes to educating the population about the benefits of insurance products. The Insurance Regulatory Authority, Kenya’s insurance regulator, conducts a number of consumer education programmes around the country on an annual basis.

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