Insurance Industry in Kenya

Overview
The insurance industry in Kenya plays a crucial role in the economy by providing risk protection,
mobilizing savings, and facilitating investments. Insurance allows individuals and businesses to
protect themselves from unexpected financial losses due to events like accidents, illness, theft, fire,
or death.
The industry is regulated under Kenya’s Insurance Act (Cap 487) and is overseen by the Insurance
Regulatory Authority (IRA), which ensures that insurers operate fairly and that policyholders’
interests are protected.

2. Structure of the Industry

a. Types of Insurance Companies
• Life Insurance Companies: These offer policies that pay out either on the death of the
insured or after a set period. They help with long-term financial planning, such as saving
for education, retirement, or estate planning.
• General (Non-Life) Insurance Companies: They cover short-term risks like accidents,
fire, theft, and illnesses. These are crucial for business continuity and asset protection.
• Composite Insurance Companies: These are licensed to offer both life and general
insurance. They provide diversified services, catering to both individuals and corporate
clients.
• Reinsurance Companies: They offer insurance to insurance companies, helping them
manage their risk exposure. The two main reinsurers in Kenya are:
o Kenya Reinsurance Corporation (Kenya Re)
o ZEP-Re (PTA Reinsurance Company)
b. Intermediaries
• Insurance Brokers: Independent professionals who connect clients to insurance
companies, offering expert advice and helping them choose the best products.
• Insurance Agents: Represent specific insurance companies and are licensed to sell their
products.
• Bancassurance Agents: Banks that are authorized to distribute insurance products. They
offer convenience by allowing customers to access insurance at their local bank.
• Risk Managers and Loss Adjusters: Specialists who assess and manage risks for
businesses and evaluate insurance claims to determine fair compensation.
• Medical Insurance Providers (MIPs): Organizations that manage health insurance
schemes and sometimes offer healthcare services directly.

3. Regulatory and Legal Framework

a. Insurance Act, Cap 487
• This is the primary law governing insurance in Kenya. It outlines the rules for licensing
insurers, handling claims, managing capital, and maintaining transparency.
• It was revised to modernize the industry, including amendments that support digital
insurance and microinsurance.
b. Key Regulatory Bodies

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 • Insurance Regulatory Authority (IRA):
o Ensures financial stability of insurers
o Protects consumers
o Develops policy and enforces compliance
o Reviews premium rates and claims practices
• Association of Kenya Insurers (AKI):
o An industry body that promotes self-regulation
o Encourages best practices, professional conduct, and consumer awareness
• Insurance Appeals Tribunal:
o An independent body that hears appeals from insurers, intermediaries, or clients
who are dissatisfied with IRA’s decisions
c. Compliance Requirements
• Insurance companies must:
o Maintain minimum capital levels based on the class of insurance offered
o Submit quarterly and annual reports to the IRA
o Conduct annual actuarial valuations
o Adhere to corporate governance standards
o Comply with anti-money laundering (AML) and know-your-customer (KYC)
requirements

4. Key Products and Services

Life Insurance Products
• Term Life: Provides coverage for a specific time (e.g., 10 or 20 years). It pays only if the
insured dies during the term.
• Whole Life: Provides lifelong coverage and builds cash value over time.
• Endowment Policies: Pay a lump sum either on a specific date or upon death, often used
for education or retirement planning.
• Group Life: Covers a group of people (e.g., company employees) under a single policy.
• Education Policies: Help parents save for their children’s education with guaranteed
benefits.
• Pension and Retirement Plans: Allow individuals to save for retirement, with benefits
paid as lump sums or annuities.
General Insurance Products
• Motor Vehicle Insurance:
o Third-party (mandatory by law): Covers injuries/damage caused to others.
o Comprehensive: Covers both third-party and own vehicle damage.
• Health/Medical Insurance: Covers costs of hospitalization, outpatient visits, maternity,
and chronic illness treatment.
• Property Insurance: Covers buildings and assets against fire, burglary, floods,
earthquakes, and more.
• Marine and Aviation Insurance: Covers loss/damage to cargo, vessels, and aircraft.
• Personal Accident Insurance: Pays out if the insured is injured or dies due to an accident.

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 • Liability Insurance: Protects businesses or individuals against legal claims for negligence
or professional misconduct.
• Agricultural Insurance: Covers crop failure and livestock losses due to natural disasters
or disease. This is increasingly relevant due to climate change.

5. Industry Performance and Trends

a. Market Penetration
• Despite growth, insurance penetration remains low (around 3% of GDP).
• Most Kenyans rely on informal coping mechanisms, due to low income and limited
awareness.
• Growth is driven by:
o Urbanization
o Expansion of the middle class
o Mobile technology
b. Key Challenges
• Low awareness and mistrust: Many Kenyans do not understand insurance or distrust the
industry due to past negative experiences.
• Fraud: Fake claims, falsified documents, and agent misconduct increase costs and reduce
profitability.
• High claims ratios: Especially in motor and medical insurance, where losses often exceed
premium income.
• Regulatory compliance costs: Insurers must invest in systems, audits, and reporting,
increasing operational expenses.
Solutions to the challenges.
1. Low Public Awareness and Insurance Culture
Challenge: Many Kenyans do not understand how insurance works, or they associate it with loss
and mistrust, leading to low uptake.
Solutions:
• Consumer Education Campaigns:
o Public awareness initiatives through media (TV, radio, social media) and
community outreach.
o Use of vernacular languages to reach diverse communities.
• Inclusion in School Curriculum:
o Introduce basic financial and insurance literacy in schools to build long-term
awareness.
• Incentivizing Insurance Literacy:
o Offer discounts or bonuses for customers who complete short insurance training
modules.
• Public-Private Partnerships:
o Collaborate with NGOs, churches, and community groups to promote insurance
benefits.

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 2. Insurance Fraud
Challenge: Fraudulent claims, fake insurance policies, and agent misconduct increase loss ratios
and erode public trust.
Solutions:
• Advanced Fraud Detection Systems:
o Use of AI and machine learning to detect unusual claim patterns.
• Centralized Databases:
o Real-time databases accessible by all insurers to share fraud information and
blacklist repeat offenders.
• Stricter Licensing and Oversight of Agents:
o Regular audits, mystery shopping, and continuous professional development
requirements.
• Stronger Penalties for Fraud:
o Work with law enforcement to prosecute fraud cases and impose heavy fines or
jail terms.
3. Underwriting Losses in Medical and Motor Insurance
Challenge: These lines of insurance often generate high claims relative to premiums, leading to
operational losses.
Solutions:
• Usage-Based and Behavior-Based Pricing:
o In motor insurance, use telematics to track driving behavior and price accordingly.
• Digital Claims Management:
o Use mobile platforms to streamline claims processing and reduce fraudulent or
inflated claims.
• Partnerships with Healthcare Providers:
o For medical insurance, negotiate fixed rates or managed care models (e.g., Health
Maintenance Organizations - HMOs) to control costs.
• Premium Adjustments Based on Risk Profiling:
o More accurate customer segmentation to ensure high-risk individuals pay
proportionate premiums.
4. High Regulatory Compliance Costs
Challenge: Compliance with financial reporting, capital adequacy, and anti-fraud standards
requires major investments in technology and expertise.
Solutions:
• RegTech (Regulatory Technology):
o Automate compliance processes using software that handles reporting,
monitoring, and alerts.
• Tiered Regulation for Microinsurers:
o Allow lighter regulation for small, community-based or microinsurance firms.
• Shared Services:
o Insurers can pool resources to fund compliance tools or create shared platforms
for reporting and audits.
• IRA Support Programs:

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 o The regulator can offer training, templates, and toolkits to simplify compliance for
smaller insurers.
5. Limited Reach in Rural and Informal Markets
Challenge: Most insurance products are tailored to urban, formal sector customers, excluding
rural dwellers and informal workers.
Solutions:
• Microinsurance Products:
o Develop simple, affordable products with low premiums and easy claim
procedures (e.g., crop failure, hospital cash cover).
• Mobile Insurance (M-Insurance):
o Leverage mobile networks (e.g., M-Pesa, Airtel Money) to deliver and collect
premiums digitally.
• Agentless or Community-Based Distribution:
o Use village leaders, cooperatives, or boda-boda riders as informal insurance
ambassadors.
• Bundled Products:
o Combine insurance with other services like farming inputs, credit, or mobile
airtime to improve uptake.
6. Negative Perception and Trust Issues
Challenge: Many people fear that insurers won’t pay claims or that the process will be long and
painful.
Solutions:
• Transparent Claims Handling:
o Publicize fast claim payments and offer real-time tracking of claim status.
• Ombudsman Services and Feedback Mechanisms:
o Set up toll-free lines, chatbots, and escalation channels for customer grievances.
• Claim Settlement Guarantees:
o Offer products with guaranteed payout timelines, or small “no-questions-asked”
benefits for emergencies.
• AKI/IRA Consumer Watch Portals:
o Allow the public to rate insurers and view performance scores.
7. Talent and Skills Gap
Challenge: There is a shortage of actuaries, underwriters, and tech-savvy insurance professionals.
Solutions:
• Investment in Professional Development:
o Sponsor actuarial and insurance courses at universities and technical institutes.
• Local Certification Programs:
o Support bodies like the College of Insurance and Insurance Institute of Kenya
(IIK) to offer upskilling programs.
• Internships and Apprenticeship Programs:
o Encourage insurers to create graduate programs targeting key skill gaps.

8. Technology Integration and Digital Transformation

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Challenge: Many insurers struggle to modernize legacy systems or embrace digital distribution
and claims processing.
Solutions:
• Adopt InsurTech Partnerships:
o Collaborate with startups or third-party developers to digitize offerings quickly
and affordably.
• Cloud-Based Core Insurance Platforms:
o Migrate to scalable, secure cloud systems that allow for automation and agility.
• Digital-First Strategy:
o Offer full self-service experiences—from quotation to claim—through web and
mobile platforms.
• IRA Incentives for Digitalization:
o Tax incentives or grant schemes for insurers that digitize key services or reach
rural areas through tech.

c. Opportunities
• Microinsurance: Low-cost insurance tailored for low-income earners, e.g., daily premium
health or funeral covers.
• Mobile-based insurance: Platforms like M-Tiba and M-Bima offer easy sign-up and claim
processing through mobile phones.
• Untapped rural markets: Large populations outside cities remain uninsured due to access
barriers and product design issues.
• Integration with mobile money: Platforms like M-Pesa make premium payments and
claims disbursement easier and faster.

6. Technological Innovations (InsurTech)

• Mobile Apps: Enable clients to buy, manage, and renew policies or submit claims
remotely.
• Chatbots and AI: Provide 24/7 customer service, guide users through product selection,
and assist in filing claims.
• Big Data Analytics: Insurers use data from smartphones, social media, and IoT devices to
analyze behavior and improve risk assessment.
• Blockchain: Improves transparency and trust by recording every transaction securely and
immutably.
• Telematics: In motor insurance, this involves tracking a driver's behavior (speed, braking,
mileage) to determine usage-based premiums.

7. Emerging Issues and Future Outlook

a. ESG and Sustainability
• Insurers are being pushed to evaluate the environmental and social impact of their
underwriting and investment decisions.
• Green insurance products are emerging to support renewable energy and sustainable
agriculture.

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b. Climate Risk Insurance
• With increasing droughts, floods, and pests, there’s a growing need for climate-responsive
insurance, particularly for farmers.
• Government and development partners are supporting weather-index insurance initiatives.
c. Regulatory Reforms
• The IRA is adopting Risk-Based Supervision (RBS), where the focus is on the financial
health and risk profile of insurers, not just compliance.
• The industry is transitioning to IFRS 17, a global accounting standard that will change how
insurers report their finances and profits.
d. Regional Expansion
• Kenyan insurers are entering neighboring markets like Uganda, Rwanda, Tanzania, South
Sudan, and the Democratic Republic of Congo (DRC).
• This regional growth strategy helps diversify risk and revenue sources.

8. Notable Insurance Companies in Kenya

1. Jubilee Insurance – Leading insurer offering a wide range of life, medical, and general
insurance products.
2. Britam – Known for strong customer service, investment-linked policies, and regional
presence.
3. ICEA Lion – Offers life, general, and pension products, with a strong corporate client base.
4. CIC Insurance – Focuses on cooperative societies, SACCOs, and microinsurance.
5. Madison Insurance – Offers affordable life and general insurance, including education
and retirement policies.
6. APA Insurance – Strong in corporate and health insurance segments.
7. Kenindia Assurance – One of the oldest insurers, known for life and general insurance
services.
8. GA Insurance – Growing presence in medical, property, and motor insurance.
9. Old Mutual Kenya – Offers insurance, investment, and banking products, part of a pan-
African financial group.

Proposal forms
These incorporate a set of questions by the insurer to be filled by the proposer of insurance in order
to effect an insurance contract i.e. insurer will be soliciting the following details about the insured:
i. Particulars of the proposer: name, age, address
ii. Proposer’s insurance history: this details the insurances he has procured in the past as well
as the insurance claims history
iii. Particulars of the subject matter: this could include for motor insurance such details as year
of manufacture, name, value, engine number, chassis number, year of purchase, cover
sought, sum insured, etc
iv. Declaration: the offer in the declaration should be detailed enough to include the following:
• Warranting- truth and fitness of answers provided

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 • Incorporating- he proposal into making it the basis of the contract
• Providing for any adjustments for premiums to be made
• In personal accident insurance, warranty that the insured will not participate in
certain sporting events

Policy Documents
The insurance policy document is a document produced by the insurers setting out the terms and
conditions of the contract of insurance.
Any reasonable ambiguity in its phraseology will be construed in favour of the insured.
Every policy is subject to conditions. Even if none is specifically mentioned in the document,
common law insists that certain implied conditions are always inherent in the contract. The basic
intentions of the policy conditions include:
• To remind the policyholder common law conditions
• To restrict the cover provided
• To grant privileges to the insured where due
• To outline certain procedural conditions to be met on the event of say reporting a claim,
revising the schedule of contents of policy, revising sum insured, changes in occasion, etc

Premiums
This defines the monetary consideration passing from the insured to the insurer. This is a necessary
element in formation of insurance contracts.
The computation of the insurance premium must be done accurately and has to cover the following
items:
• Claims: it has to cover all the cost of claims as it is the very foundation of insurance.
• Catastrophic risks: besides the usual claims,
• Administration costs e.g. salaries, rent, transport, etc
• Reserves: to provide for future use
• Profits

Renewals
Renewal of insurance contract is continuance of the contract from its expiry date. The insured
sends the insurer a renewal advice advising on premiums payable and upon payment of these
premiums or promise to pay in future the policy will be renewed for another term.
At renewal circumstances may have arisen necessitating insurer to vary the terms of the contract.
Sometimes the renewals may not be invited at all meaning that the policy has lapsed or renewals
may be invited with new set of conditions. Some underwriting considerations leading to an
amendment of renewal terms include:

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 i. No claim discount entitlement: an accident free year entitles the insured to some discount
of premiums from the insurer. This is a bonus or token to recognize and encourage safe
driving among the policyholders. Hence the premium payable is less than that paid in the
first term
ii. Bad claims record: where bad claims are noticeable these may necessitate imposing new
terms and conditions on the policy e.g.
• Increase in premium
• Reduction in cover
• Imposition of a policy excess
• Imposition of restrictive warranties
iii. Age of the insured- insurer may put restrictions given advancement in age
iv. Sums insured: re-computation of sums insured may be necessary to cater for depreciation
and addition of assets to the schedule of policy.