Kenya’s insurance penetration has declined to 2.8 percent of the Gross Domestic Product (GDP) for the first half of 2017 compared to 2.9 percent for a similar period last year, a Nairobi-based investment firm Cytonn said Monday.
Cytonn Investments, Investment Analyst Caleb Mugendi, told a media briefing in Nairobi that the decline was due to a combination of factors that have resulted in faster economic growth as compared to the insurance uptake.
“Penetration rates are declining as there is lack of product innovation as the sector has witnessed duplication of products thus flooding the market with irrelevant products,” Mugendi said during the launch of the Cytonn Insurance Sector Report for the first half of 2017.
Mugendi said that insurance penetration has been declining from high of 3.5 percent experienced five years. Currently Africa’s insurance penetration rate stands at 3.5 percent.
Kenya has 55 insurance companies, six of which are listed at the Nairobi Securities Exchange. Mugendi said that steady growth has been fueled by the expansion of the middle class.
“Rising disposal income has led to demand for insurance products especially in the motor vehicle sector,” he added.
According to Cytonn, the insurance sector can expand if it combines mobile technology and innovation with insurance services given that Kenya’s mobile penetration rates currently stands at 88.7 percent.
The investment analyst also noted that Kenyan firms are pursing regional expansion in order to expand their revenues.
“A number of Kenyan based insurance companies have opened subsidiaries in Rwanda, Uganda and the Democratic Republic of Congo in order to expand their client base,” he added.
Kenya’s insurance industry is expected to receive a boost after the government passed a law at the beginning of the year requiring all commercial imports to be insured locally. Enditem