By Cecilia Makau

Kenyan banks have in recent years ramped up their insurance product offerings as the country pushes to lift uptake beyond 2.3 per cent.  

The latest industry data by the Association of Kenya Insurers (AKI) indicates that gross written premiums sold through bancassurance distribution channels grew from Sh19.5 billion in 2019 to Sh35 billion in 2023, representing a 79.4 per cent growth.  

The pure distribution model -where the bank behaves as a distribution agency of the insurance products to its customers - is the most popular bancassurance model adopted in the country.  

Since 2004, when the Central Bank of Kenya granted the license to the first commercial bank to operate a bancassurance business, nearly 30 banks and microfinance institutions have adopted the service.

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However, the low levels of insurance penetration in the country indicate that more still needs to be done to exploit the immense potential not just in Kenya but across the continent.

South Africa currently leads the continent in the sector, accounting for approximately 74 per cent of all African insurance premiums, whereas the other 53 African countries collectively account for a mere 0.4 per cent of the global insurance market.

In Kenya, the banking sector has a wide-reaching distribution network, comprising more than 40 licensed commercial banks with over 1,500 branches located throughout the country.

Additionally, the availability of services through agency banking and digital platforms significantly enhances accessibility for customers.

The bancassurance model offers a unique opportunity for insurance companies to engage with a large and diverse customer base, thereby facilitating increased penetration.

Under this model, customers benefit from the convenience of accessing insurance products alongside a comprehensive range of financial services, including savings accounts, loans, and foreign exchange.

The role of Small and Medium Enterprises, SMEs as a growth engine for the economy remains central in Kenya as in other developing economies.

The World Bank estimates that 90 per cent of businesses globally are SMEs.

In Africa, they account for 80-90 per cent of businesses according to the International Finance Corporation, IFC.

In Kenya, the sector accounts for 24 per cent of GDP and 93 per cent of the economy's entire labour force, according to the Ministry of Trade and Industry.

Yet the segment has largely been neglected when it comes to the development and distribution of insurance products and services.

For instance, according to Kenya's National Bureau of Statistics (KNBS) Medium and Small Enterprise Covid-19 Survey of 2020, about 20 per cent of SMEs closed permanently due to the Covid-19 outbreak.

Most of these entities had not taken protection against business interruption.

They also did not have any other form of risk management to withstand or recover from the global pandemic.

Having insurance coverage would have made these entities more resilient by transferring unpredictable risk to the insurers.

Such lessons have prompted lenders like Credit Bank, which has a special focus on SME lending, to enhance their bancassurance offering, ostensibly to cater for this segment.

The firm has since unveiled new bancassurance products and services, including motor, property and insurance premium financing.

include education policy, investment policy on tractors, All Risk (CAR), Liability insurance, burglar insurance, All Risks Insurance and domestic package.

SMEs can also have access to insurance cover for cash and goods in transit, personal accident cover and travel insurance for themselves and their employees.

These tailored products allow customers to purchase insurance alongside their banking needs, offering convenience and potentially increased accessibility. 

With the right pricing strategy and with more lenders coming onboard, more SMEs will have the unnecessary cover to protect against unforeseen risks and the industry as a whole would progressively record an increase in insurance uptake.

Cecilia Makau is the Head of Bancassurance, Credit Bank PLC