NAIROBI, Kenya, Oct 4 – Banks and insurance companies will no longer need to offer their services separately as more companies work on consolidating their operations.
Standard Chartered Bank CEO Lamin Manjang says the companies will need to work together to offer their services driven by the need of a one-stop shop by the widening middle-class.
Manjang was speaking during the signing of a bancassurance partnership between the bank and non-financial service firm Sanlam Kenya, where they intend to offer general insurance products such as motor private cover and domestic insurance cover.
Bancassurance is an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank’s client base, an arrangement that can prove to be profitable for both parties.
“Kenya’s competitive financial sector coupled with regulatory changes has made the need for income diversification for banks. Bancassurance business has become a very key pillar in terms of our income diversification strategy. Standard Chartered Bank Kenya has experienced a significant growth in income from bancassurance and also wealth management product,” Manjang said.
Standard Chartered has been in the bancassurance industry for two years following its entry into the sector through its subsidiary Standard Chartered Insurance Agency Limited.
The entry of the duo into the bancassurance industry comes at a time when insurance uptake has reduced marginally which the regulator of insurance has credited to poor knowledge of the products.
Currently, insurance penetration in Kenya stands at 2.73 per cent, which is considered low compared with the world average of 6.28 per cent.
“Despite the low intake, Kenya’s middle-class is growing and the need for services such as the ones we are introducing today is critical. Our penetration is at 2.73 per cent which is still low. However, in the wider East African region, Kenya accounts for 70 per cent of all insurance products bought,” said Sanlam Kenya Group CEO Mugo Kibati.
Insurance in Kenya is mainly sourced through agents, brokers or directly by insurance companies with agents taking the lead by 46.3 percent.
Currently, there were 26 bancassurance insurance agents in 2015 upon from 19 the previous year, according to the 2016 Annual Insurance Report.