Kenya’s insurance market will grow two fold in the next two years according to assurance, tax and transaction advisors Ernst and Young (EY).
EY says 125 insurance executives polled across 7 countries in Africa see a significant upside in premium growth with Kenya likely to achieve a growth rate of 6 per cent through 2018 from the current 3 per cent penetration.
The firm said that there was especially low supply of life insurance products in Sub-Saharan Africa where population is expected to increase rapidly in the coming years.
Kenya has 65 per cent of its premiums on non-life cover with Tanzania and Uganda both at 88 per cent. Ghana is the most balanced between life insurance (46 per cent) and non-life (54 per cent) while Zambia had 70 per cent non-life insurance.
“The Kenyan expansion will be driven by uptake of technology, GDP growth and consumer demand for new products,” EY East and Central Africa Financial Service Advisory leader Steve Osei-Mansah said.
This is despite the fact that insurance penetration in the country dropped to 2.93 per cent in 2014 compared to 3.44 percent in 2013 according to the Association of Kenya Insurers (AKI).
ABC Capital’s Insurance sector report on the country, says the sector’s average returns of about 20 per cent and the low penetration levels, will be a strong pull for investors seeking higher returns amidst trends of economic shocks in other sectors.
Kenya’s insurance industry has seen a lot of foreign interest from various regions with some of the recent entries including Allianz from Germany, Saham Finances, Old Mutual and Swiss Re.
The market has also seen mergers and acquisitions including Real Insurance Company which was acquired by British-American Investments Company Limited while Pan Africa insurance bought 51 per cent stake into Gateway Insurance.
EY however say the industry will be mainly driven by organic growth even as foreign players troop in to benefit from the attractive opportunities.
They also say the country may witness change in distribution channels from agents and brokers to mobile phones, direct channels and bankassurance, a revolution that increased financial penetration in the country.
According to Africa head of UK based Microensure Tughral Ali, in the future, insurance products will be carried in mobile phone applications rather than as a by-product of the telcos.