The report states that a solid economic growth and a cashless payment system make Kenya ripe for robust insurers gains.
EY Global Insurance Leader Shaun Crawford says Kenya’s steady economic growth and expanding middle class with high disposable income is proving it to be a high potential market for insurance companies.
Currently, Kenya’s overall insurance penetration as a percentage of the GDP is at 2.93 percent, almost triple that of Tanzania and Uganda.
“There is still an opportunity for growth as more consumers show high adaptive instincts to caution themselves against risks,” Shaun added.
According to the report, 68 percent of Kenyan insurers expect that organic growth will continue to be their biggest source of revenue over the next 12-18 months.
However, the insurance market anticipates seeing more acquisitions and investments owing to favourable economic growth.
Several international insurance companies have expressed interest in buying stakes in existing Kenyan enterprises or setting up subsidiaries, as they foresee the potential growth of the sector.
However even with the bright future, a few challenges are inhibiting its growth.
Among the challenges include culture and education especially life insurance that accounts for 35 percent of premium income.
“There are already existing community structures that address death and funeral arrangements. Therefore, insurers cannot assume that traditional life policies will work in this market. Innovation is going to be key.” Crawford explained.
Recruiting and retaining talent has also been affecting insurance companies in the country.
The report indicates lack of talent has become a critical issue in the insurance sector pointing out that it is difficult to find qualified agents and marketing staff in the insurance industry in Kenya.
In Kenya, agents and brokers account for at least 50 percent of policies sold – making them currently the largest single channel.
The report has also cited fraud as a major reason insurance acceptance is low in the country with 95 percent of Kenyan respondents citing fraud as the Key risk associated with expanding their businesses.
Survey respondents cited technology as one of the most significant enablers for growth, at the same time the biggest challenge.
According to 75 percent of survey respondents, insurers who can leverage technology better will be better able to capitalize on cross-industry collaborative products.
Three quarters of insurers surveyed say that online underwriting platforms and mobile underwriting platforms will be important growth drivers.
“There have been some early stage pilots of digital underwriting in the industry. But nobody has managed to have a real breakthrough. I think the industry needs this big breakthrough to drive genuine inclusion in insurance,” Crawford added.
Kenya has the highest insurance premium paid per capita at US$39 in sub-Saharan Africa excluding South Africa.
In 2014, Kenya generated insurance premiums worth US$1.8 billion and Oxford Economics expects the Kenya insurance market to grow to US$2.2 billion by 2018.