The number of licensed insurance brokers in the country fell by nearly a third to 139 in 2015 from 198 in 2014 according to the 2015 insurance industry annual report by the Association of Kenya Insurers (AKI).
This was lower by 187 brokers recorded in 2013. There were 170 brokers in 2012 and 168 in 2011 as a result of the effects from amendments to the Finance Act.
The report shows insurance firms operating locally expanded 10 per cent, from 49 insurance firms in 2014 to 51 as at the end of 2015.
Insurance agents increased in the period to stand at 6,424 compared to 5,155 agents in 2014.
The gross written premium increased to Sh173.79 billion in 2015 compared to Sh157.21 billion the previous year.
Comparatively, the Insurance Regulatory Authority (IRA) H1’2016 report numbers for the insurance industry showing that total gross insurance premiums registered a year-on-year growth of 8.6 per cent to Kshs 106.0 billion from Kshs 97.7 billion in H1’2015, compared to 15.3 per cent increase a year earlier.
According to the IRA report, the total industry profitability remained flat year-on-year, with industry profit after tax at Kshs 6.8 billion driven by a 1.2 percent decline in general business profitability.
Both reports, AKI and IRA note that the overall insurance penetration in 2015 was 2.79 percent compared to 2.93 percent in 2014 remaining below the three percent mark despite a positive growth.
Patrick Tumbo, Chair AKI says, “In 2014, penetration was affected by the rebasing of the GDP upwards. The low penetration is an indication of untapped opportunities for insurance business in areas such as oil and gas, real estate, infrastructure, bancassurance, microinsurance and agriculture.”
The market penetration in terms of the Gross Domestic Product (GDP) Non-Life products stand at 1.80 percent compared to the life insurance products at 0.99 percent.
However, besides the low penetration in the country, AKI notes that Kenya leads the whole East African region with 3 percent penetration. In Africa its penetration is 3.5 percent.
Cytonn Investments analysis says Kenya’s ratio of insurance companies to total population stands at 1.1x, with 51 insurers serving 47 mn people, compared to South Africa’s 175 for 55 mn, Ghana’s for 49 for 28 mn, Nigeria’s 60 for 188 mn and Namibia’s 31 for 3 mn.
Some of the reason include: low levels of income, inadequate awareness of the benefits of insurance and life insurance remains particularly underdeveloped.
Cytonn Investment’s H1’2016 Insurance Report themed, “Given transition in the banking sector, what next for insurance?” proposes that there is a need to; diversify and tailor-make products to cater for all income brackets, support the uptake of life insurance through market awareness to grow the low penetration of 3.0 percent compared to South Africa at 14.0 percent, and increase regulation in the industry to be in line with the riskiness of the business and to reduce fraud in the industry.
Maurice Oduor, Investment Manager at Cytonn Investments says the Kenyan insurance sector needs to adopt the banking model that enabled more people to access their services.
“Most Kenyans still approach insurance with a lot of suspicion. They need to embrace Kenyans and meet their needs. The trigger is if they will embrace and carry out effectively what the Kenyan banking sector did 15 years ago.”
“If the insurance penetration rate is at 3 percent and still record positive growth, if we can move that to 6 percent the growth will be phenomenal, they need to just give more specific products to the Kenyans to propel the growth,” he adds.
AIG Insurance CFO Victoria Ipomai tells The Oxford Business Group that, “The growth over the past 10-15 years has mostly been the informal sector but most of the SMEs are not insured. We need to find out why as a sector. The common thread is product innovation so that we come up with products that meet the real needs of the target population.”
The robust growth of insurance in Kenya, with the financial services sector in Kenya currently contributing 10.1 percent to country’s GDP growth, from a 3.5 percent can be attributed to the: convenience and efficiency through insurance firms adopting alternative channels for both distribution and premium collection such as bancassurance and improved agency networks, advancement in technology and innovation making it possible to make premium payments through mobile phones, and a demographic boost in Kenya, such as a growing middle class, which has led to increased disposable income, thereby increasing demand for insurance products and services.
But still, the analysts claim Kenyans are over-insured with Low Penetration with 51 firms, which equates to about 1.1 insurance company for every 1 million Kenyans.
The problem is further exacerbated by a large number of Kenyan insurance agents and marketers who are unqualified holding back growth opportunities for the local insurance industry as noted by Ernst and Young study on insurance opportunities in sub-Saharan Africa reported by The Star Kenya,
In the Cytonn report, Non listed insurance companies were reported to be more efficient in asset utilization to derive premium growth with 53.5 percent of assets, and have 58.6 percent of premiums. However, efficiency of non-listed companies has declined; in Q1’2016 they controlled 62.2 percent of premiums with 53.8 percent of assets.
Kenya Reinsurance Corporation and CIC Insurance Group emerged as the most attractive insurance companies in Kenya in the first half of 2016. The two listed insurance companies topped the “H1 2016 Cytonn Insurance Report” from both a potential return and financial health perspective.
Jubilee Holdings dropped one position from its last ranking in 2015 to 3rd position out of the six listed insurance firms in Kenya. Sanlam, which until the recent rebranding was trading as Pan Africa Insurance Holding, retained its position at the bottom in both the total return score category and franchise score category.
“With Kenya’s insurance penetration at 3% compared to Africa’s average of 3.5%, there is still a lot of room for growth and the sector has adopted alternative channels of distribution. To further enhance the quality of returns in the sector, there is a lot of diversification of investments especially into real estate where the returns remain high and stable. With the expected increase in regulations we expect a lot of product innovation and the consolidation is expected to continue,” said Elizabeth Nkukuu, Cytonn’s Chief Investment Officer.