What robust insurance industry means for the Kenyan economy

Throughout the issue, the journal delves into questions of the effects of climate change, technology, regulation and changing demographics to the industry, with expert analysis and commentary from some of the leading luminaries of the sector offering interesting insights.

However, another facet of the question and one that persists in the face of stagnant growth in insurance penetration despite steady gross domestic product (GDP) and population growth is: what would a strengthened insurance sector mean for Kenya and its economy?

According to AKI’s latest industry report, insurance penetration in Kenya stood at 2.29 percent, reflecting a low level of penetration of insurance-related services in the domestic economy and a slower growth rate in premium revenue relative to GDP growth.

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AKI notes that these trends are indicative of the slow-down in expenditure on insurance-related services and that the current level of insurance penetration is a cause of concern if the demand for insurance products declines and the market becomes even more competitive.

There has been broad consensus in the sector that industry players need to develop new business models, review distribution channels and product offerings and pivot with more agility to serve the needs of the changing demographics. What is less talked about, however, is what the stakes are in ensuring that these paradigm shifts happen in good time.

A strong insurance sector means businesses and individuals in the country are cushioned against extreme economic shocks from the local and global economy.

The lessons from the Covid-19 pandemic, perennial cycles of floods and droughts and changing geopolitics have all served to inform businesses across the various sectors that the risks to their existence are plenty and often beyond their control.

Despite robust investments in digital infrastructure, Kenya’s insurance industry as yet remains underprepared to face the growing risks that these developments pose to businesses and individuals in the near future.

It is commendable that industry players and companies are alive to the challenges facing Kenya’s insurance sector at this pivotal time and some are taking deliberate steps to mitigate the imminent disruption. However, knowing the problem is just the first step in solving it.

There is a need for industry leaders to keep in mind what is at stake should they be caught flatfooted.

The writer is the managing partner, Maudhui House Limited, a policy affairs consultancy. [email protected]