Kenya’s Insurance Business Opens Up to Foreign Ownership

Kenya’s Insurance Business Opens Up to Foreign Ownership

Kenya’s Insurance Act is being amended to open up ownership of insurance companies and brokerage firms to other citizens of the East African Community (EAC) trading block.

Already, the Banking Act Cap 488 has been amended widening the distribution channels by introducing bank assurance and agency banking.  At the moment, the law does not allow foreign banks to set up their own agencies — a situation that stifles growth of the bank assurance model where banks are used as delivery channels to sell insurance products to customers.

“Allowing foreign controlled banks such as Barclays, Standard Chartered and CFC Stanbic banks to set up insurance agencies will open up the sector to more competition [and] increase the level of penetration as the big banks sell insurance products to their customers,” Kennedy Abincha, Managing Director for Trident Insurance Company told AFK Insider.

The country’s 2012 Insurance Industry Annual Report lists 46 insurance companies as operating at the end of 2012. Twenty-three companies wrote non-life business, 11 wrote life insurance while 12 were composite.

There were 170 licensed brokers, 24 medical insurance providers and 4,862 insurance agents. Other licensed players included 149 investigators, 92 motor assessors and 21 loss adjusters, three claim settling agents, 10 risk managers and 27 insurance surveyors.

“In order to encourage multinational banks to conduct bank assurance and deepen insurance penetration, I propose to amend the law to remove restriction of foreign ownership of insurance agents,” Henry Rotich, Cabinet Secretary for National Treasury told parliament during the 2013/14 budget speech in June of this year.

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With a huge turnover, the entry of large multinational banks into Kenya’s insurance agency business is expected to drive up activity in this sector, where penetration remains low at three percent, according to figures from the 2012 Association of Kenya Insurers (AKI) report.

Last year, an average of $3,677 per capita in nominal terms was spent on insurance in advanced markets. This is slightly less than in the previous period as life insurance spending fell to $2,133 from $2,152. Overall insurance penetration remained at 8.6 percent.

Figures from Swiss Re, Economic Research and Consulting, places Hong Kong at the top with the highest penetration at 12. 44 percent. This is compared to 3.6 percent for Africa and 3.16 percent for Kenya.

AKI figures also indicate that in 2012, the industry incurred net claims totaling $570 million compared to $443 million in 2011, representing an increase of 28.31 percent.

Top on the list of factors contributing to the low uptake of insurance products in Kenya include a negative public perception as a result of individuals and third party claimants providing misleading and false information, which makes the claims management a tedious and expensive process.

“As a result of fraud, the insurance industry has been associated with numerous malpractices which have led to the overall negative perception associated with the business. The industry is also seen to be slow in settling claims,” said Caroline Wanjiku Munene, General Manager and Principal Officer of Africa Air Rescue (AAR) Insurance Kenya Limited. This is a subsidiary of the AAR Group of companies, and the insurance arm of the business in Kenya.