By Kevin Nyarang'o
As actuarial Students, we are well informed that the insurance and finance sector are our main employers. It goes without question that we hope that these sectors blossom. Aside from this selfish reason, we all agree that the insurance dream is good for everyone.
According to the African Development Bank, in 2019 Kenya’s real GDP grew by an estimated 5.9%. This however, was lower than in 2018, which had a growth of 6.5%. Taking the first half as an example, the year 2018 Kenya’s economy had grown by 6.4% which ranked higher compared to the same period of 2019, which saw an increase of 5.6%. Notwithstanding, the financial services and insurance sector ranked as the most improved increasing with 2.1 %, to 6.7% up from the 4.6% registered in 2018.
In an article published by the Nairobi Business Monthly, the growth could mainly be attributed to technology and innovation, regulations and capital raising. Some of the ways by which technology has helped are that it has enabled insurers to automate manual processes redundancy and disassembling of information. The key discipline that technology has come in handy is the risk profiling and pricing of the policy. The article further states that, Kenya has experienced a skyrocketing mobile penetration standing at 51 million subscribers, a boom that has enabled insurance to increase their market. Innovations such as M-tiba which is a service that enables customers to set funds aside for healthcare played a key role. The integration of AI based technology had an impact that cannot be overlooked in improving insurance and finance profitability.
Under capital raising, Wanjala notes that due to a move to a risk-based capital adequacy framework, firms and key players have advanced towards capital raising to garner for capital. The decrease in the solvency margin fell from 27.9% in the first half of 2018 to 26.9% of the same period of 2019. Implying that assets grew faster than shareholder’s funds, thus “With the new capital adequacy assessment framework, capital is likely to be critical to ensuring stability and solvency of the sector to ensure the businesses are a going concern.”
In contrast, the above analysis points only to an opportunist point of view, as the data stands in an irony of the insurance penetration in Africa and more specifically, Kenya. Though Kenya scores the best growth of insurance penetration in East Africa it only stands at a low of 2.4% of the GDP, hitting the lowest in 15 years as per 2019. The related record was in 2013 that saw a penetration of 3.44% of the GDP with consistent drop for a successive five year period. (Insurance penetration drops to a 15-year low, 2019). The above disparity is a clear indication of an ever-growing economy and a sector that is unable to keep up with the speed.
Tom Gichuhi the chief executive of Kenya Association of Insurers (KAI), suggests that the woes could be attributed to two main factors; poor pricing of policies and an insufficient penetration level to keep up with the pace of GDP growth (Insurance penetration drops to a 15-year low, 2019). Though it is accurate to lay the blame on the insurer for lacking sufficient innovation to reach the masses, some general public sagacious work as a stumbling block to the insurer. The assumption that certain insurance services, for example, life insurance, is for the rich has played a key role in hindering the penetration of insurance coverage in Kenya.
So bringing it home, is there a boom in the insurance and finance sector? Yes, of course. Are the key players in the sector keeping pace? No, it is also not debatable that there is room for improvement. So the question that should be asked is if the actuarial profession has a role to execute?
Actuarial Science graduates know they stand a chance to work in most, if not all financial institutions that give a key interest in research and risk management These include insurance firms, banks, audit firms, research firms, et cetera. In a nutshell, there is an ever-growing room for the actuarial profession, as there is no doubt that the world is trying to embrace risk as part of nature and insurance as a necessity. Furthermore, it should be highlighted that such fields of a data analyst, risk management et cetera, have an increasing appetite for the actuarial profession.
Great piece