Insurance firms shun Counties in favour of Nairobi’s free flowing premiums

There is need for insurance companies to develop strategies to embrace the changes, following an expanded market in terms of both insurable population and property insurance at County levels.

Concerns have been raised that most of the 56 licensed insurance firms in Kenya, were mainly concentrating their activities and marketing their products for the same clients in the capital city, ignoring the rest of the counties despite growing insurable risks brought about by devolution.

Insurance Regulatory Authority (IRA), Assistant Manager-In-Charge of Licensing and Enforcement, Mr Erick Komolo, said the underwriters should plan to expand their operations to counties outside Nairobi, associated with thriving economic activities such as agriculture, mining, manufacturing, transportation, financial, real estate and wholesale and retail trade.

Latest data from IRA indicates that Nairobi still maintains its ranking as the largest source of insurance premiums, pointing to the growing unexploited markets outside the capital city.

Nairobi County took up an estimated 84.5 percent of total premiums in 2020, up from 83.2 percent the previous year, despite contributing only 21.7 percent to the Gross Domestic Product.

The data from Insurance Regulatory Authority (IRA), shows Nairobi handed insurers Sh190 billion premiums, while the other 41 counties fetched them a combined Sh 13.08 billion translating to a mere 5.8 percent.

Speaking during a training held in Nakuru to educate journalists on the nature of insurance products, contracts as well the policy holders’ rights and obligations, Mr Komolo noted Mombasa, Kenya’s second biggest city, only accounted for Sh 9.2 million or 4.1 percent of the total Sh 224,957,183 premiums, followed by Kiambu with 1.8 percent or Sh4 million.

Nakuru was placed fourth, earning insurers Sh 3.7 million or 1.7 percent of premiums followed by Kisumu city with 1.1 percent at Shs 2.5 million and Nyeri at Sh 2.4 million translating to 1.1 percent. The rest of the counties contributed premiums of below one percent.

“Outside Nairobi and Mombasa agriculture has been a key driver of growth in most devolved units. Yet, insurers have not been keen to take up insurance opportunities in this sector that accounts for about a third of the country’s Gross Domestic Product (GDP),’’ Mr Komolo said.

According to Kenya National Bureau of Statistics (KNBS) Counties with huge agricultural potential include Nakuru, Nyandarua, Kiambu, Elgeyo Marakwet, Meru, Narok, and Bomet. Overall, while the service sector drives 54.6 percent of counties’ economic activities, agriculture follows at 24 percent and industry at 21.4 per cent. KNBS says agriculture is the most spread across counties.

Industrial activities such as manufacturing are mainly concentrated in urban counties, namely: Nairobi, Kiambu, Mombasa, Machakos, Kisumu, Nakuru, and Kajiado.

The IRA Assistant Manager said untapped opportunities for industry sector development were plentiful in Lamu, Samburu, Isiolo, Tana River, Elgeyo Marakwet, and Baringo counties, a market that he argued insurers should exploit.

He said failure by underwriters to exploit opportunities at county level had led to a drop in Kenya’s insurance penetration that had plummeted to 2.17 percent of Gross Domestic Product (GDP), the lowest in 15 years, made worse by little innovation or creativity, failure to pay claims poor marketing, price undercutting and fraud among other challenges.

The reach hit its peak in 2013, when it stood at 3.44 percent, but the rate has been declining in the last five years with a vast population of low income as well as micro and small businesses generally not covered. The global average insurance penetration currently stands at 7.2 per cent.

“In the natural order of things, insurance penetration ought to expand in tandem with the growth of the economy. In Kenya, however, the reverse is happening, leaving more businesses and individuals exposed to all manner of risks,” Mr Komolo observed.

Insurance as a financial service, he noted, is yet to be recognized as a risk mitigation tool by the majority of the population. Mr Komolo regretted that in times of financial crises, many people still rely on traditional sources of help like family, harambees and sale of assets among other things.

The regulator, he assured, was exploring ways of enhancing penetration of insurance such as licensing established structures like supermarkets, Saccos, Micro Finance Institutions and petrol stations as channels of distribution to enhance access to underwriting services.

He stated that insurance the industry was critical for continuity of socio-economic activities adding that in the event of unexpected shocks such as fire, drought, loss of jobs and risks, insurers are expected to step in and mitigate losses and ensure financial stability for businesses and homes.

However, despite the drop in insurance penetration the industry asset base grew by 8 percent from Sh709.05 billion in 2019 to Sh765.93 billion in 2020. Of these assets 85.7 percent were held in income generating investments which grew by 10.5 percent from Sh594.03 billion in 2019 to Sh656.46 billion in 2020.

“The sector has not been thriving despite the growing opportunities presented by the expanding economy across the counties. The penetration level is not keeping pace with GDP growth. Nairobi has in fact been losing its share of contribution to GDP as the other devolved units develop. This presents immense opportunities for insurers who will look beyond Nairobi,” explained Mr. Komolo.

While noting that buyers of insurance want clear information on products and attributing confusing details on policies to the low uptake in Kenya, Mr Komolo said the regulatory body was focusing on improving access to insurance services through use of technology and enhancing mechanisms for protection of insurance consumers.

He stressed the importance of insurance agents and brokers giving accurate information adding “There is a need to educate consumers on the available insurance products and the potential risks so that they can make informed choices about which insurance products may be relevant. Insurers should come up with sustained efforts to enlighten the public through adequate information about their products,”

Mr Komolo suggested that to address widespread public mistrust, insurance companies should recruit agents who are well trained and of high integrity while establishing a mechanism of monitoring their agents to ensure they give credible, relevant and adequate information to clients.

Insurance companies, the Assistant Manager stated, have a duty to educate consumers on their products even if the exercise did not translate into an immediate sale. He added that underwriters should analyze the market and develop products suitable and affordable to the customers while identifying various segments of the market and determining their needs, concerns and interests as they develop the insurance products.

“But our activities can only be effective if the insurance providers operate in a transparent manner. For instance, insurance companies should strive to settle claim payments within the stipulated period and where this is not possible, explain the circumstances to the clients,” Komolo said.



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