While motor private and medical classes are the two largest units in Kenya’s insurance underwriting business, they are also among the most loss-making businesses.
Other major business classes, in terms of gross underwritten premiums, include Motor Commercial, Industrial, Workman Compensation and Industrial,
In an Insurance Outlook Report 2019/2020 for East Africa, released by Deloitte, the audit firm states that the operating environment has only become more competitive with premium rates being revised downwards in the more competitive business classes.
It adds that sub-optimal investment returns on property and equity markets, which have been used as a safety net to compensate for underwriting losses, have further driven down the fortunes of insurance companies.
Furthermore, the pace at which disruptive technologies have been taken up by incumbents and the entrance of non-traditional insurers in the market is slower than expected.
“Customers are becoming more enlightened, aware of their insurance needs, and are increasingly being sceptical of what insurers have to offer them,” said Rebecca Kariru- Muriuki- Actuarial and Insurance Solutions Leader, Deloitte Financial Institutions Services Team.
The report warns that only those insurers who are able to capitalise on the opportunities that digitisation and automation offer, will most likely be the biggest beneficiaries.
In its outlook, the report notes that over the last five years, the life insurance market in Kenya has experienced growth in both the level of direct premiums as well as in the equity held by the industry constituents.
There has been a record of positive returns on shareholder’s equity in this time frame. However, the return on equity has been varying year on year with a decline recorded over 2017 to 2018.
This report lists the top insurance firms as Britam, KenIndia, ICEA, Jubilee and Liberty Insurance in that order. It observes that returns on equity have been on a downward trend despite a rising growth in gross written premium.
This trend is attributed to a slow economy that is expected to continue exerting downward pressure on return on equity as insurers compete with new and existing players for market share.