Synergies between banks and insurers to fix sector

Imende Benjamin

Insurance companies will now tap into the enormous customer base already established by banks and leverage financial institutions to cushion themselves from reliance on traditional agents.

This will enhance insurance penetration and coverage, and also amalgamate banking and insurance services under one roof, if a new policy becomes effective.

“Bancassurance is an intermediary business that involves collaboration between a bank, a microfinance bank or a financial institution, and an insurance company to market and distribute insurance products,” according to the draft National Insurance Policy.

Bancassurance will allow insurers to access additional capital and customers to access claims easily.

“The pillars of the policy are market conduct, legal and regulatory environment, access and uptake of insurance, safety and stability of the insurance industry, as well as technology and innovation,” it says.

The policy developed by the National Treasury will strengthen the existing legal and regulatory framework to increase penetration, coverage and industry growth.

It also seeks to remove restrictions on foreign investment in the industry, establish an insurance ombudsman office and introduce a shared data ecosystem.

The policy also proposes a review of legal and regulatory frameworks in line with emerging market developments and enhance disclosure requirements to limit fraud and open new opportunities.

It will enable local insurers to participate in major infrastructure development projects, adopt technology, enhance distribution models, access tax incentives and subsidies on premiums in key economic sectors.

It also supports private sector participation in the insurance industry, which will promote capital investment and capacity development.

The new rules empower the industry players to provide a range of products in the insurance market.

Also emphasised is the promotion of financial inclusion through products such as micro-insurance and sharia-compliant products combined with the enhancement of consumer protection legislation and practices. 

It will also enhance sound financial and risk management in the insurance market.

Customer-centric insurance

The policy cites its specific objectives  as strengthening, legal and regulatory environment, enhancing access to customer-centric insurance products and services, and mobilising financial resources for long term development. 

Others are to ensure broader financial inclusion and access and promote public confidence through provision, servicing of insurance products and services and prompt settlement of claims,” the policy says.

In a forward to the draft report, National Treasury Cabinet Secretary Ukur Yatani says performance of the insurance industry in recent years has deteriorated significantly.

The level of underwriting losses for 2019, for instance, he says was the worst experienced by the general insurance sector for the last 20 years at Sh 3.27 billion despite having written a premium of Sh132 billion in the same year.

Most of these losses came from the motor classes of the general insurance businesses where underwriting losses increased in 2019 by 92.4 per cent to Sh 7.35 billion, with private motor insurance returning underwriting losses for the eighth year running. The total motor insurance premium was Sh 46 billion.

“This level of underwriting losses cannot continue if the insurance industry is going to a sustainable risk management tool in Kenya,” Yatani says.