Artemis Kenya +254 20 231 5530

+254 20 231 5530
Tue, 9th Aug 2022

At USD 68.6 billion, insurance premiums across the entire of Africa account for only 2.6% of the world’s USD 2.58 trillion.  Out of the USD 68.6 billion written across Africa in 2012, South Africa, accounted for over USD 48 billion (approximately 70%), part of which included close to 90% of total life premiums written in the whole of Africa.

The growth potential of the insurance industry in Africa is huge.  Standard and Poor’s Financial Services LLC, for example, rated Kenya B+ as at the end of 2012, while Moody’s Investor Service, put the country at B1, which ratings give indication of the country’s economic potential.

Increasingly stable economies in Africa, improved political governance, economic diversification, rapid adoption of communications technology and improvements in infrastructure give the insurance industry a solid platform on which to project their growth over the next ten years.

Currently, non-life insurance premiums in Kenya are growing at 15.9% while life insurance premiums and contributions from deposit administration and investment/unit linked contracts are growing at 15.8%.

The insurance regulatory authority (IRA) in Kenya, responsible for regulating, supervising and developing the insurance industry in the country, has identified corporate governance, lack of innovation, and low utilisation of onformation technology as some of the insurance industry's key challenges in the region:

There are several other concerns within the insurance industry:

  • Low penetration More
  • Except for South Africa which has penetration rates of 2.6% for non-life and 11.6% for life insurance, much of Africa is still characterized with low penetration compared to rest of the world.

    Africa’s total gross life premiums stand at USD 46.8B, accounting for 1.8% of the world’s total life assurance premiums, while non-life insurance premiums add up to USD 22.4, representing 1.1% of global non-life premiums.  In comparison, the United Kingdom, for example, has a combined penetration of 11.8%, Hong Kong 11.4% and Japan 11%.

    Kenya, for example, has a combined insurance penetration of 3.02%, with penetration of life at 1.02% and non-life insurance at 2.0%. 

    In Tanzania, gross premiums for the year 2011 stood at Tsh. 344.7B (USD 209M), up 20.1% from Tsh. 287B (USD 174M) the previous year.  Penetration over the same period grew 3.5% from 0.86% to 0.89%.

    In Uganda, GDP grew by 5.9% in 2011 and despite insurance premiums growing by 23.7% the same year, penetration remained at 0.65%.

    Clearly, potential for growth in the insurance industry is huge.

    High levels of poverty, low savings, added to a general lack of awareness, however, mean that this potential can only be exploited through unique, tailored and carefully thought out approaches; approaches that will reign in numbers to lower various risk factors, as well as ensure that profitable, yet affordable, premiums are obtainable from such numbers.

  • Concentration and low risk capacity More
  • There are over forty-five licensed insurance companies in Kenya, over 140 insurance brokers, and over 3,700 insurance agents.

    With gross premiums at just over Ksh. 100 billion, the insurance market suffers considerable overcapacity.  Close to 70% of the insurance market in Kenya is controlled by the top ten companies by gross premium, leaving over 63% of insurance companies in Kenya with less than the 3% average market share.

    While this situation is a an outcome of free market forces, it has created a fragmented industry increasingly characterized by price wars, and significantly constrained the risks that companies in the local market can carry.

    Kenya’s insurance market would definitely be better served by fewer, larger, stronger and more profitable insurance companies able to comfortably carry a wide range of risks as well as reach out to the market with a range of well targeted and affordable products.

    In the meantime, competition remains cutthroat and wil continue to put enormous pressure on local insurance companies to develop strong differentiation strategies.

  • Business mix and risk profile More
  • Motor commercial and motor private insurance make over 45% of the local general insurance business. In terms of profitability, motor private has consistently recorded an average loss ratio above 63%, and motor commercial, an average loss ratio above 54%.  Medical insurance, written by only fourteen of the country’s medical insurance providers has consistently recorded a loss ratio in excess of 75%.

    Despite their high loss ratios, motor commercial and motor private business account for over 65% of the general insurance business written in more than half of the local insurance companies, with these two accounting for up to 90% of general insurance business in some companies.

    This is a highly risky business model, only able to survive on the back of high investment income returns, such as fixed income securities, real estate and from the equity market, all in which the local insurance market has substantial investments.

    Long-term growth and sustainability of the local insurance industry will require insurance companies to increase their capitalization, diversify their risks and see to it that they make substantive underwriting profits.

    As at 2011, the industry’s leading companies posted between 44% and 58% underwriting profit.

  • Customer service More
  • For a long time, a relationship of unclear accountabilities between insurance companies, insurance agents and the public has been responsible for the general lack of confidence in insurance companies across the world.

    This has led to a generally negative perception of the insurance industry within the public, and with this perception, a loss of confidence in the industry.  Many people still consider insurance companies and insurance agents to be insincere and obscure in their conduct of business.

    The prevalence of insurance-related fraud perpetrated by both insiders within the insurance industry, service providers and the insured, has not helped the adversity with which the insurance industry and the public have engaged each other.

    This unfortunate situation has cast many insurance companies and intermediaries in unfavourable light and required them to invest substantially in customer service and image building to overcome this negative positioning.

    Accusations of customer service failure within the insurance industry are nonetheless not without merit.  A profile of customer service failures within both general and life insurance, given below, suggests the need for a mutli-pronged response to customer service within the industry, specifically targeting the following, among others:

    • Organisational customer service policy
    • Business operating procedures
    • Implementation and monitoring of service level agreements (SLAs) between insurers and their intermediaries
    • Product development
    • Consumer education
    • Selling skills
    • Interactive service delivery skills, including the handling of customer complaints

    Customer service failure points in general insurance business

    Customer service failure points in life-insurance business

  • Legal and regulatory framework More
  • Developments in the financial services sector in Africa have not been matched by the regulatory framework within which institutions in the financial services industry have been working.

    In Kenya, for example, institutional reforms impacting on the insurance industry, such as those directing governance of insurance companies in the Finance Act of 2009, and in the amendment of the Insurance Act, Cap 487 under the Finance Act, 2010, strengthening of the Insurance Regulatory Authority (IRA) through amendment of the Finance Act, 2011, incentives provided and the freeing up of funds through amendments to the Collection of Taxes and Duties Act, Cap 415, and others, all aim at  streamlining the financial services industry, as well enhancing public access to financial services – of which insurance is part.

    These changes in the regulatory framework within which insurance companies operate are set to open up vast opportunities for strategically well positioned firms.

    Starting May 2013, for example, the Central Bank of Kenya authorized mainstream commercial banks to sell insurance products, shares, and broker bonds, which, it is expected, will step up competition in the market and drive up insurance penetration across the country.

    Despite mobile money platforms in Kenya accounting for over Ksh. 15 trillion annually in money transfers through some two million transactions daily, fluidity in the regulatory environment has considerably contributed to its remaining a largely underexploited area for insurance companies.

At firm-level, these challenges pose considerable threat to sustainability of individual firms. 

In the insurance sector, our work has been based on three organisational requirements:

  • Strategy More
  • With the homogeneity of insurance products, insurance companies, brokers and other intermediaries are only able to grow substantively if they are able and willing to pursue bold and innovative differentiation strategies.  Strategy is one of the areas in which we work within the insurance industry to explore. 

  • Learning and development More
  • Increased options for financial security, and a much more enlightened target market present new challenges in the insurance industry.  This is the background against which we have developed training programmes in two areas of business development which are of distinct relevance to the insurance industry:

    In addition, we run a variety of tailored programmes aimed at strengthening insurance agencies, on which so many of the bigger insurance companies depend for business.

    All these are specially tailored programmes and you are welcome to make enquiry based on your specific requirements.

Insurance industry performance

Despite various challenges, the Kenyan insurance industry has consistently recorded stable results, albeit with supressed growth. 


Is micro-insurance a strategic choice or a market inevitability

Micro-insurance has quickly caught on within developing economies characterised by a growing number of low income earners otherwise locked out of mainstream insurance.  Some companies have attributed their growth (at least top-line growth) to their entry into micro-insurance, while others have considered the revenues obtained from micro-insurance not commensurate with what it takes to support the corresponding business activity in order to deliver the quality of service they would want to deliver - and especially with the level of automation within the economies in which micro-insurance is commonly found.

Is micro-insurance the next growth frontier for insuerers in Tanzania?


More on micro-insurance

India is one of the countries in which micro-insurance has been particularly successful.  In this presentation, Dr R. Kannan of the Insurance Regulatory and Development Authority in India delivers useful insights for emerging micro-insurance markets. 


Customer service failure in general insurance business

Claims of poor customer service within the insurance industry are not without merit.  A profile of customer service failures in general insurance has been compiled, through the redress of which individual businesses can distinguish themeselves and provide a differentiated experience.


Customer service failure in life insurance business

Claims of poor customer service within the insurance industry are not without merit.  A profile of customer service failures in life insurance business has been compiled, through the redress of which individual businesses can distinguish themeselves and provide a differentiated experience.


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