Insurance Analysis in Kenya

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Introduction
Insurance in Kenya is known to have been in existence for over sixty years now with the first insurance companies believed to have been owned by British insurers during the colonial times. The industry is governed by the Insurance Act and regulated by the Insurance Regulatory Authority. The Insurance Regulatory Authority (IRA) was created by the Insurance (Amendment) Act of 2006 and came into operation on 1st May 2007.

The Authority was established with the mandate of regulating, supervising and developing the insurance industry. Before the establishment of IRA, these functions were performed by the Department of Insurance in the Ministry of Finance. (IRA 2010) As per AKI Insurance Industry Report for the year 2009, there were 44 licensed insurance companies, majority offering non-life insurance business only, nine of them life insurance business while fifteen were composite (both life and non life). There were 137 licensed insurance brokers, 21 medical insurance providers (MIP’s) and 3,076 insurance agents. Other licensed players included 106 investigators, 57 motor assessors, 18 loss adjusters, 2 claims settling agents, 5 risk managers and 26 insurance surveyors.

The industry’s contribution to the country’s GDP is still low although there has been notable growth for the last seven years. The gross written premium by the industry was Kshs 64.47 billion compared to Kshs 55.19 billion in 2008, representing a growth of 16.8 %. The gross written premium in non-life insurance was Kshs 43.11 billion (2008: Kshs 36.89 billion) while that from life insurance business was Kshs 21.36 billion (2008: Kshs 18.30). Non-life insurance premium grew by 16.8 % while life insurance premium and contributions from deposit administration business grew by 16.7 %.

The combined industry profit after taxation increased by 14.4% to Kshs.4.29 billion compared to Kshs 3.85 billion in 2008. In 2009 the industry paid Kshs. 20 billion for claims for general insurance business and as benefits to life policy holders.(AKI 2009) Penetration of insurance in the year 2009 was 2.84% compared to 2.63% in 2008.Life insurance recorded a penetration ratio of 0.94% (2008:0.87%) while that of non-life insurance was 1.90% (2008:1.76%).

Only half a million Kenyans, about 1% of the total population are said to have take up life insurance. Up to 80% of Kenyans have no insurance cover due to widespread poverty and a false belief that insurance covers are mainly for the rich. However, based on the recent industry statistics, there is an emerging trend that Kenyans are indeed sensitive to the need for protection against an uncertain risky future.

According to Swiss Re (World Insurance Report2009), South Africa is the leading African country in the insurance industry, accounting for 90% of the total volume, followed by Morocco then Egypt. Growth in non life insurance business in Africa was sluggish at 0.4%. The report pointed out that Africa produced only 1.94% of the global premium volume in 2009. South Africa’s life insurance premium fell by 16%, premium Growth in Morocco remained flat at 0.1%, while in Egypt premiums shrank by 5%.

There are currently five major players in the insurance industry in Kenya. These include The Co-Operative Insurance Company of Kenya Ltd. (CIC), UAP Financial Services Ltd, APA, Jubilee Insurance and Resolution Health East Africa. Majority of these insurers operate nationally with a few operating regionally. Some international insurers have entered the Kenyan market through mergers with already existing players.

Two of the leading companies were formed through a merger between two existing insurance companies, for instance, APA was formed after a merger between Apollo and Pan-Africa General divisions. Others form partnerships with small insurance companies to cover non-traditional policies like political violence.

Solutions need to be developed to address new risks. Insurers have finally recognized the...
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