Treasury mulls reforms to enhance insurance uptake
Steve Umidha @UmidhaSteve
National Treasury in consultation with the Insurance Regulatory Authority (IRA) is considering sweeping changes in the country’s insurance industry in a move meant to attract more investments in the sector.
It said it was in the process of developing a National Insurance Policy meant to strengthen and improve the sector’s legal and regulatory environment as well as increasing penetration levels.
“The ultimate goal is to increase insurance penetration through improved access, usage and affordability of insurance products and services,” said Julius Muia, Principal Secretary in the Ministry of Treasury and Planning.
In addition, Muia said in a statement that the policy “will provide an enabling environment for sustainable development, promotion and maintenance of an inclusive, efficient, fair and stable insurance sector as envisaged in Vision 2030.”
Such sector changes are expected to attract foreign investors in an industry whose liabilities grew by 9.3 per cent to Sh592.19 billion in the last quarter of 2020 from Sh541.91 billion reported in the 4th Quarter of 2019, according to latest IRA figures.
Existence of such a policy is also expected to affect insurance premium pricing in Kenya as it is currently known.
Last month, for instance, IRA announced that it had started a search for a consultant to recommend changes to the current methods used in calculating premiums paid by customers in general insurance that covers motor vehicle, personal accident, fire and health.
The consultant will be required to provide guidance on appropriate flexi-premium rating and banding for various classes of general insurance business – while premiums suggested will, however, have to show what will be the likely impacts on capital ratios of insurers and the affordability for customers.
This comes at a time experts continue to express concerns over rates and risk classification presently facing challenges such as low transparency and arbitrary pricing, while anxieties about availability and affordability of insurance products still persist.
Recommend amendments
The planning office has now called on the public and stakeholders’ views on the policy in a procedure meant to encourage them to have expressive input into the decision-making process.
The public is allowed to recommend amendments on the policy development process.
“Treasury invites interested members of the public to submit any comments or inputs or memoranda they may have on the draft Policy. To be received by Friday, April, 16, 2021 on or before 5.00pm,” noted the statement.
Kenya’s Insurance penetration in Kenya dropped to 2.43 per cent of gross domestic product (GDP) in 2019, which was the lowest in 15 years on the back of price undercutting in a highly competitive market.
The industry’s penetration levels has been a worrying concern for regulators even though many companies continue to announce profitability.
Low penetration levels hit its peak in 2013, when it stood at 3.44 per cent of GDP, but has been dropping for seven consecutive years.
“It is a clear indication that the sector has failed to ride on insurance opportunities presented by the expanding economy,” commented Tom Gichuki, Chief executive of Association of Kenya Insurers.
