(Nairobi) – Bancassurance is becoming the dominant force in Kenya’s insurance market, with banks steadily increasing their share of the industry and challenging traditional insurance companies.
A recent report by the Association of Kenya Insurers (AKI) and Research 8020 highlights that bancassurance is growing rapidly, with key sectors such as motor, fire, medical, and theft insurance contributing significantly to the rise of non-life insurance. Bancassurance is a system where banks sell insurance products alongside their regular banking services, a strategy that has allowed Kenyan banks to diversify their offerings and expand their income streams.
Since its introduction in 2004, when the Central Bank of Kenya licensed the Commercial Bank of Africa (CBA), which later merged with NIC Group to form NCBA, bancassurance has seen consistent growth. Today, most major banks in Kenya are involved in the bancassurance business, collectively holding a growing share of the insurance market. In 2023, the market saw an increase in gross written premiums to KSh 34.9 billion, up from KSh 30.8 billion the previous year.
This surge in bancassurance is largely driven by the growing demand for vehicle insurance, as well as insurance products tied to loans and mortgages. Banks, with their strong financial resources and extensive customer base, have become key players in offering these products, and they are now controlling a substantial portion of the non-life insurance market. Motor insurance, in particular, was responsible for a 58.6 percent market share in 2023, boosted by a rise in the number of vehicles on Kenyan roads.
The overall insurance market saw its gross written premiums reach KSh 361.4 billion in 2023, up from KSh 312.1 billion the year before. Within the bancassurance segment, insurance linked to credit and mortgages contributed KSh 10.4 billion in premiums, while individual life insurance brought in KSh 4.8 billion. Group life and last expense products also formed part of the growing underwriting business in the sector.
As banks continue to invest in and expand their insurance offerings, their dominance in the sector is expected to have significant consequences for smaller insurance firms. Many of these smaller players may struggle to compete with the financial strength of banks, prompting some to merge in order to stay competitive. The AKI projects that bancassurance could become the leading distribution channel for insurance in Kenya within the next five to ten years. This could make it even more difficult for small, stand-alone insurance companies to survive, especially those that have not yet met the required capital thresholds.
To ensure they can compete, smaller insurance companies are being encouraged to merge and strengthen their capital base. According to Tom Gichuhi, the CEO of AKI, it is crucial for these companies to build up their financial strength now in order to survive the strong competition posed by the rise of bancassurance. He noted that players in the general insurance sector must meet a core capital requirement of KSh 600 million, while life insurers are required to have a minimum capital of KSh 400 million, totaling KSh 1 billion for firms offering both types of insurance.