Kenya Uganda Insurance Market

Britam Medium Term Note Programme Information Memorandum 2014
47
11. INDUSTRY OVERVIEW
11.1. Overview of Insurance Sector
The insurance sector players include reinsurance companies, insurance companies, insurance brokers, medical
insurance providers, insurance agents, loss assessors, insurance investigators, loss adjusters, surveyors and claims
settlement agents. As at 31
st
December 2013, the industry had 45 licensed insurance companies and three locally
incorporated reinsurance companies. There were 174 licensed insurance brokers, 26 medical insurance providers
(MIPS). Other licensed insurance players included 129 investigators, 96 motor assessors, 20 loss adjusters, one
claims settling agent, eight risk managers and 26 insurance surveyors.
Table 9: Kenya insurance industry players
Year
Insurance
Companies
Brokers Investigators MIPS
Insurance
Surveyors
Risk
Managers
Loss
adjusters
Motor
Assessors
2007 43 201 213 21 30 8 23 -
2008 42 141 152 19 19 6 17 -
2009 44 154 112 25 29 6 20 60
2010 46 159 121 26 26 10 22 74
2011 45 168 128 28 28 8 21 89
2012 46 170 140 24 27 10 21 92
2013 45 174 129 26 26 8 20 96
Source: IRA website as at 25
th
April 2014
TheInsurance Regulatory AuthorityofKenya (IRA)is the sole authority charged with regulation and supervision of
theinsurance industry.
The Authority works collectively and individually with industry players in achieving the following fundamental
insurance regulatory objectives:
i. Ensure compliance by insurance/reinsurance companies and intermediaries with legal requirements and sound
business practices;
ii. Promote voluntary compliance;
iii. Set clear objectives and standards of intervention for insurance/reinsurance companies andintermediaries or
type of intervention;
iv. Protect consumers and promote high degree of security for policyholders;
v. Promote effcient, fair, safe and stable markets;
vi. Maintain the confdence of consumers in the market;
vii. Ensure insurance/reinsurance companies andintermediaries remain operationally viable and solvent; and
viii. Establish a transparent basis for timely, appropriate and consistent supervisory intervention, including
enforcement.
48
Below is a chart showing the top 10 insurance companies by total revenue as of December 2013.
Chart 7: Market share by total revenues
Source: Britam estimates, AKI Insurance Industry Statistics 2013
The companies are further broken down to the top companies in gross written premium as of December 2013 as
follows;
i. Life insurance;
ii. Ordinary Life including unit linked;
iii. Group Life insurance;
iv. Pension;
v. General; and
vi. Medical Insurance.
Chart 8: Gross premium income for life insurance companies
49
Chart 9: Gross premium income for ordinary life insurance companies
Chart 10: Gross premium income for group life insurance companies
50
Chart 11: Pension income
Chart 12: Gross premium income for general insurance companies

51
Chart 13: Gross premium income for medical insurance companies
11.1.1. Trends in the Insurance Sector
11
Kenya is the largest insurance market in East Africa. The value of its insurance market has more than doubled over
the fve-year period between 2009 and 2013, growing from KShs 64.5 billion to KShs 131.0 billion (representing a
Compounded Annual Growth Rate (CAGR) of 19.4%).
Chart 14: Kenya insurance industry growth in written premiums
Source: AKI Insurance Industry Statistics 2013
The gross premium for non-life business grew by 21.3% to KShs 86.7 billion in 2013 compared to KShs 71.5 billion
in 2012 while that of the life insurance business grew by 19.47% to KShs 44.3 billion in 2013 compared to KShs 37.1
52
billion in 2012. The total assets of the industry were at KShs 358.0 billion, total liabilities KShs 259.0 billion and the
shareholders funds of KShs 98.2 billion as at 31
st
December 2013.
11 AKI insurance industry statistics 2013
11.1.2. Non-Life Insurance Industry
The major classes of non-life insurance business are Motor, Fire, Work Injury Beneft Act(WIBA), Personal Accident,
Marine, Theft and Medical Insurance. Other classes include Liability, Aviation, Engineering and Miscellaneous
Accidents. Non-life insurance products generate more than two-thirds of insurance premiums written in Kenya.
A breakdown of non-life insurance revenue earned, shows that motor insurance accounts for almost 40% of total
premiums written. The respective market shares for the major non-life insurance groups are as follows:
Chart 15: Premium distribution for major non-life insurance classes in 2013
Non-life penetration in Kenya is low in comparison with the developed world but compares favourably (ranks number
three) with most of Africa. For example, Kenyas non-life penetration in 2012 was 2.1%, whereas Egypt had just
0.4% and Nigeria 0.5%. However, South Africa reported a fgure of 2.6% followed by Namibia with a penetration of
2.5% for the same period
10
.
11.1.3. Life Insurance Industry
During the last ten years growth of life insurance sector in Kenya has been driven by increase of GDP, the SME
sector, the expansion of the middle class and allowance of life insurance premiums as a tax expense. As a result the
penetration of the sector has steadily increased from 0.8% to slightly over 1.0% as at 2012
11
.
There are four broad classes of life insurance in the Kenyan market, namely:
a) Ordinary Life Assurance which comprises all individual life policies categorized as: Term Assurance policies;
Endowment policies; Investment Policies and Whole life policies.
b) Group Life Assurance which comprises of: Group Life schemes mainly organized by employers on behalf of
their employees; Group Credit/Group Mortgage Schemes which are loan protection schemes organized by
fnanciers like banks, co-operative societies, microfnance institutions; and Last expense schemes which are
commonly given as a rider to the group life schemes. Nevertheless, Last expense covers can also be arranged
on standalone basis.
c) Superannuation Business. This comprises annuity business provided as pensions to retired person. It also
comprises management of retirement benefts funds for trustees. Britam provides guarantees on annuities and
guarantees investment on retirement beneft funds.
10 AKI annual report 2012
11 AKI annual report 2012
53
d) Investment/Unit Linked Contracts whose main objective is to facilitate the growth of capital invested by the
client.
In Kenya, total premium income and pensions contributions from all four classes of life insurance business was
KShs 44.3 billion in 2013 compared to KShs 37.1 billion in 2012. A breakdown of life insurance revenue earned
in 2013 shows that ordinary life insurance accounted for 40.0% of total premiums written. The respective market
shares for the major life insurance groups are as follows.
Chart 16: Premium distribution for major life insurance classes in 2013
Life penetration in Kenya is extremely low in comparison to the developed world. However, it is a growing industry
and compares favourably against most of Africa. For example, Kenyas penetration in 2012 was 1.1%, whereas
Egypt had just 0.3% and in Nigeria it was only 0.2%. At the other extreme, South Africa reported penetration of
11.6% for the same period.
Penetration is low because individual life insurance is normally driven by middle class and urbanization development.
Furthermore, the tax incentives for life insurance policies are comparatively low. Distribution of general and term
insurance policies is also costly. As a result, penetration is low in Kenya in relation to South Africa and other more
developed nations.
11.1.4. Industry Challenges
General challenges faced by insurance frms are signifcant but these challenges help to differentiate and accentuate
the standing of successful players.
i. Poor industry image
Education of the public with regard to the use of insurance products is virtually non-existent thereby contributing
to under-utilisation and low uptake by ordinary Kenyans and SMEs. This shortcoming is felt especially on life
insurance which is not regarded by households as an important channel for long-term savings and/or provision
against adverse events as witnessed by the low penetration which according to the 2012 AKI annual report is
slightly above 1.0%. These challenges are being systematically addressed by the IRA which was established in
2008 with the mandate to promote the insurance industry as well as to regulate it.
ii. Fraudulent claims
The cost of claims, particularly for motor and medical insurance, has been driven upwards by a degree of
fraud with the result that most insurance companies have elected not to underwrite public service vehicles
54
(PSV) and medical insurance. For PSV, very high court awards and the sheer length of time spent in court
have deterred the majority of underwriters from participating in this risk category. The introduction of structured
compensation is being contested by the legal fraternity despite the advantages of stability being positively
affected by this initiative.
iii. Access to distribution channels
Distribution channels are vital for any business. In the insurance industry, the choice is to systematically build
a tied agency network and/or use the licensed intermediaries of the industry. Intermediaries have a very strong
position with respect to access to the customers and timely onward payment of premiums to the insurance
companies. An amendment to the Insurance Act ensured that insurance risks are underwritten on cash and carry
basis thereby limiting the power of intermediaries and ending a regime in which collection of premiums was a
serious challenge. The industry is also afficted by high distribution costs due to low adoption of technology.
iv. Fragmentation of market share
The presence of a large number of players and similar products with no switching costs for most corporate
business has resulted in price undercutting as market players compete with each other for business. The issue
is exacerbated by the presence of 174 insurance brokers in the market. This has resulted in the commoditisation
of many general insurance and group life products. Efforts are being made by the Insurance Regulatory Authority
and Association of Kenya Insurers to arrest and reverse this trend and for insurance companies to present
sustainable value propositions to customers through strategic and marketing plans.
v. Terrorism
The tragic attack on the Westgate mall in September 2013, resulted in major insurance claims. These claims
included fre, consequential loss, property damage, WIBA, medical and life insurance. Some of the claims
were not paid by the insurance industry because insureds had not elected the extent of their scope of cover
to include terrorism. There is now a heightened awareness resulting in high take up of the cover. The scale of
demand would have normally resulted in price reduction but the increased incidence of terrorism is likely to
result in price inelasticity from reinsurance providers.
vi. Reinsurance support
Reinsurance cover is a prerequisite for insurance. The cost of reinsurance is driven by global and local claims
experience, complexity and volatility of risk among other factors. Emerging risks including oil and energy, mining
and terrorism, political risks and microinsurance all require reinsurance facilities in order to be underwritten at
cost effective premiums.
11.1.5. Ugandan Insurance Sector
As at December 2013, the Ugandan Insurance industry had 22 insurance companies of which two were life insurance
companies, six were composite insurance companies and 14 were general insurance companies, one reinsurance
company and 26 insurance brokers. Other insurance industry players included 16 loss assessors, four loss adjustors
and 9 insurance surveyors
12
.
12 IRA Uganda website as at April 25
th
2014
55
Chart 17: 2012 Market share for the non-life insurance companies in Uganda
Source: IRA Uganda annual report 2012
Chart 18: 2012 Market share for life insurance companies in Uganda
The insurance industry is stable considering the large business growth potentials, and positive proftability growth,
which are supported by relatively stable macro-economic conditions, and growth in the national economy. Gross
premiums grew at a CAGR of 20.5% from 2008 to 2012. Although the market size is still small compared to some
countries within the region, it has been growing steadily.
13
13 Source: IRA Uganda annual report 2012
56
Chart 19: Insurance gross premium in UShs billion by top 10 companies
11.1.6. Non-life Segment
Table 9: Gross premium income for non-life segment
UShs 000s 2008 2009 2010 2011 2012
Income 151,463,476 181,612,031 216,345,217 262,243,982 312,974,105
By September 2014, the law in Uganda requires separation of life and non-life insurance business.
14

Non-life insurance gross premium income registered a growth of 19.34% from UShs 262.24 billion in 2011 to UShs
312.97 billion in 2012. The Gross Premiums have grown at a CAGR of 19.89%. Gross Premiums written for non-life
insurance represented 89% (UShs 312.97 billion), while life insurance accounted for 11% (UShs 39.2 billion).
11.1.7. Life Insurance Segment
Table 10: Gross premium income for life insurance segment
UShs 000s
2008 2009 2010 2011 2012
Income
15,788,203 20,442,000 23,637,818 34,586,693 39,257,324
Life insurance business has grown at a decent rate recording a CAGR of 25.57% between 2008 and 2012. During
the period under review, life policies were provided in three forms:
Life individual insurance policies which cover individuals against the risk of premature death or pay a maturity
beneft.
Life group insurance policies taken out by employers on the lives of the employees or by groups of persons for
other reasons including loan protection.
Deposit Administration Plan which provides a beneft on retirement, death or early withdrawal from a scheme.
11.1.8. South-Sudan Insurance Sector
The countrys insurance sector is still developing an insurance regulatory framework. There are approximately 24
insurance companies three of which are Kenyan companies, that is, Britam Insurance Company Limited, UAP
Insurance and CIC Insurance. The regulator, Central Bank of South Sudan continues to develop the sector but at
present, little information on the sector is publicly available.
14 Source: IRA Uganda annual report 2012

Kenya Uganda Insurance Market

Diunggah oleh

Informasi Dokumen

Judul Asli

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Kenya Uganda Insurance Market

Diunggah oleh

Hak Cipta:

Format Tersedia

Britam Medium Term Note Programme Information Memorandum 2014

Anda mungkin juga menyukai