Why insurance penetration is low among EAC States

IRA Chief Executive Godfrey Kiptum. [David Njaaga, Standard]

Increased rural-to-urban migration has been cited by regional insurance regulators as one of the key setbacks to the growth of the sector.

In their first strategic plan, the East African Insurance Supervisors Association (EAISA), to which the Insurance Regulatory Authority (IRA) is a member, have also noted negative perceptions and mistrust towards the sector’s services and low levels of financial literacy as hindrances to product uptake.

These are some of the challenges that EAISA seeks to address in the five-year strategic plan as the association also pursues harmonisation of regulations across the East African Community (EAC) partner States in a bid to have the insurance market in the region operate as one.

Apart from IRA Kenya, other members of the association are IRA Uganda; Tanzania Insurance Regulatory Authority; Insurance Supervisory Authority Democratic Republic of Congo; Insurance and Supervision Agency, Burundi and the National Bank of Rwanda.

While one of the purposes of the strategic plan is to have the region’s insurance sector operate as one, the plan points to the challenge of some of the Partner States belonging to different trading or economic blocs.

“The challenges of balancing the interests of various regional economic and trading blocs, including AfCFTA, Comesa, EAC, Ecowas and SADC, require EAISA to navigate complex regulatory and market interactions,” reads the strategic plan for 2024/25–2028/29.

When it comes to social challenges impeding the growth of insurance in the region, the insurers’ lobby lists public health issues such as Covid-19 and Ebola that disrupt the business environment.

Insurance fraud is also a factor. “High levels of insurance fraud, especially in motor and medical insurance classes pose a significant challenge for market growth,” reads the plan.

The plan also cites negative perceptions and mistrust towards insurance services which hinder uptake. Some social and cultural risk coping mechanisms, the plan states, also influence the uptake of insurance products.

The plan also cites rural-to-urban migration as a challenge to the growth of the sector. IRA Chief Executive Godfrey Kiptum confirmed Kenya’s superior market compared to the rest of the region.

“Kenya being the biggest, I think last year we had a gross written premium of Sh360 billion and we expect that we will continue to grow as this has been the trajectory for the last three years since Covid,” he said. EAISA Chairperson Kaddunabbi Ibrahim, who is also the CEO of IRA Uganda noted the low penetration of insurance against countries’ respective Gross Domestic Product (GDP).