Insurance brokers eye growth in a rapidly changing market

Insurers expect faster economic recovery and additional digital technology investments in 2022 despite lingering concerns about Covid-19 variants.

Investors in the sector say the industry is maturing and shining a positive outlook as the year takes shape.

There is consensus that 2021 saw widespread challenges but vaccine deployment and easing of pandemic-related restrictions were important catalysts that helped rebuild confidence while fueling economic recovery.

“Demand is growing especially in medical (insurance). The Covid-19 pandemic affected growth projections but the industry weathered it and generally performed well,” says Association of Insurance Brokers - Kenya Chairman Anthony Mwangi.

According to a survey by Deloitte Centre for Financial Services, the global outlook foresees growth. China is predicted to lead the way with nine per cent growth in 2022, followed by other emerging markets at 4.9 per cent, while advanced markets are likely to see more moderate gains averaging three per cent.  

Mr Mwangi says people were pushed to read more online by the pandemic, accumulating necessary knowledge on how the industry operates, and the importance of getting insured.

Yet the ride could be bumpy. The challenges insurers face range from economic hurdles, such as the likelihood of sustained inflation to sustainability concerns including climate risk, diversity, and financial inclusion.

Others are rapidly-evolving consumer products and purchase preferences, and political uncertainty as the General Election nears.

“We don’t expect much to happen because the country learned a lesson in 2007 (post-election violence). However, there may be more insurers seeking political risk coverage,” Mwangi tells Financial Standard in an interview.

Insurers are increasingly dependent on emerging technologies and data sources to drive efficiency, enhance cybersecurity, and expand capabilities in their operations. 

However, most should also focus on improving the customer experience by streamlining processes with automation as well as providing customised service where needed and preferred.

Mwangi says this will help the sector cope with emerging disruptions in the industry including adoption of insurance services by the banking sector.

Besides the potential of new Covid-19 strains to hinder or even derail economic recovery and the sector’s growth prospects, insurers are likely to grapple with several fundamental bottom-line threats.

Rising inflation, for example, combined with flat interest rates could turn out to be a major obstacle to improving profitability.

Rapid increases in demand for goods, materials and labour, as well as ongoing supply chain disruptions have been increasing the claims on personal and commercial property losses. 

Corresponding price hikes for construction materials, rental vehicles and auto parts (including hybrid car semiconductors and computer chips for smart cars) are among the expenses that could drive up insurer costs this year.

This factor alone is likely to keep pushing property and casualty (P&C) prices higher for buyers.

Recently, the High Court suspended a planned increase of motor vehicle insurance premiums by up to 50 per cent, pending the determination of a case filed by a human rights organisation.

Justice James Makau said in a ruling that the case by Kenya Human Rights Commission has chances of success owing to the issues raised in the petition.

But Mwangi says the increase has been long overdue and the industry is just correcting its own mistakes.

“There has been fear of overpricing by the sector. However, increasing costs incurred in garages and others that have risen over time leave motor vehicle insures with no option but accept the reality,” he says.

“Not increasing the rates will mean insurers will stop insuring high-risk vehicles such as matatus”.