Insurance in Kenya, Part I

A friend asked me to talk about insurance like a normal person(in simpler terms) as a way to wake up my seriously frozen brain in view of the events that have characterized my life in the recent past and as a way to destruct my mind.  So here’s to sanity resuming here and there. Let me try, with research aid to make myself informed and useful. This will probably be in a series of posts considering how wide Insurance as a subject/ topic is.

1. Introduction

Kenya’s insurance industry has endeared itself to clients and potential customers through new products and a significant improvement on its service delivery platforms in the recent years. The public has also grown increasingly aware of the importance of insurance in view of their day to day lives and the possible risks they’re exposed to.

1.1 The Insurance Regulatory Authority (IRA)

The Insurance Regulatory Authority is a statutory government agency established under the Insurance Act (Amendment) 2006, CAP 407 of the Laws of Kenya to regulate, supervise and develop the insurance industry. It is governed by a Board of Directors which is vested with the fiduciary responsibility overseeing operations of the Authority and ensuring that they are consistent with provisions of the Insurance Act. The creation of the Insurance Regulatory Authority (IRA) to replace the office of the Commissioner of Insurance under the Ministry of Finance has not only instilled a sense of confidence in the regulatory framework in the industry but has also injected new approaches to ethics, management and growth of the insurance investments in Kenya.

1.2 The Association of Kenya Insurance (AKI)

AKI is a Member’s-Association for the Insurance companies in Kenya. The membership of the Association is open to any Insurance company duly registered under the Insurance Act to transact business in Kenya. The Association’s main objective is to promote adherence to prudent business practices by its members and to creating awareness among the general public with a view of accelerating the growth of the insurance business in Kenya.

The Association of Kenya Insurers (AKI) is the umbrella body, which brings the about 43 Insurance companies together (According to the AKI Website). The Association was established in 1987 and was registered under the Societies Rules 1968 (Rule) and under Certificate of Exemption for Registration No.2166 of 5th January 1988.

1.3 Association of Insurance Brokers in Kenya (AIBK)

There also exists the AIBK which is a body registering the insurance brokers and agencies. This among other initiatives is steadily paying off with more consumers angling to take-up the services. Practitioners in the industry are also enhancing the quality of their products and services as well as the market penetration strategies.

In consultation with the regulator, agents’ body and member associations, the insurance firms have and are developing products to meet consumer needs and ensuring service delivery in an under-exploited market category.

The Industry is regulated by the Insurance Act. Cap 487 which has been under review in the recent times. The Insurance Amendment Act, 2006 brought the Insurance Regulatory Authority to life. Certain sections of the Insurance Act, Cap 487 were amended effective 1st May, 2007 to allow for the Conversion of the Department of Insurance into an autonomous Insurance Regulatory Authority. Click Here for a copy of the Insurance Act.

2. Industry Statistics

According to PwC, in 2007, there were 43 insurance companies and 2 locally incorporated reinsurance companies licensed to operate in Kenya. Of the licensed insurance companies, 20 were general insurers, 7 long term insurers and 15 were composite (both life and general) insurers. In addition, there were 201 licensed brokers, 21 medical insurance providers (MIPS), 2,665 insurance agents, 23 loss adjusters, 1 claims settling agent, 8 risk managers, 213 loss assessors/investigators and 8 risk managers in 2007.

Short term business dominates the Kenyan market with its premiums making approximately 70% of the gross written premium (including deposit administration contributions) in 2007.

The gross premium written in 2007 (including deposit administration contributions) amounted to KShs. 47 billion distributed as follows:

Short term business Amount (KShs billions) % of total premium
Motor private 5.5 17%
Motor Commercial 8.8 27%

Personal accident

6.3 19%
Fire industrial 3.8 12%
Other classes 8.5 26%
Total 32.9 100%

 

Long term business Amount (Shs billions) % of total
Pensions 5.5 38%
Ordinary Life 6.1 41%
Group Life 3.0 21%
Total 14.6 100%

The table below shows the assets and liabilities for the insurance industry in Kenya as at 31 December 2007:

 

Amount (Shs billions)
Total assets 128
Total Liabilities 97.5
Net assets 27.4

*Source: AKI 2007 Report

Claims

Kenyan insurance companies generally report high loss ratios. Between 2004 and 2007, the loss ratios for the industry as a whole ranged between 56% and 60%. Insurers have traditionally relied on investment income to act as a cushion for their underwriting results.

Note: *Anyone with updated information? Please post a link*

To be continued…

Sources:

  1. IRA
  2. AKI
  3. PWC

2 thoughts on “Insurance in Kenya, Part I

  1. Now I dont mean to be a mean bad guy here but Isnt US insurance going downlhill? What do you think? Now I mean first it was bailing those greedy insurance companies and now lack of total responsibility towards an ethical insurance towards the poor. Where is Uncle Sam Heading?

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