This archive report was first published on 10 May 2021.
As the insurance sector in Kenya continues to grapple with declining penetration levels since 2018, it has become a prime target for money laundering activities. The sector's wide range of money transfer processes, including transfer of ownership, withdrawal at maturity, premium overpayment, and premium refunds, makes it vulnerable to such activities.
Life insurance firms are particularly at risk due to the massive flows of funds into and out of their businesses. Most life insurance firms offer flexible policies and investment products that allow customers to deposit and withdraw large amounts of cash with minimal reduction in value, making them a target for fraudsters.
However, the last five years have seen a growing number of insurance companies adopt innovation and modern technology to curb the vice. According to the Insurance Regulatory Authority (IRA), the use of technology during the COVID-19 lockdown has led to a decrease in direct expenses, resulting in a lower cost of doing business.
Despite this positive trend, the sector still faces significant challenges. In the fourth quarter of 2020, general insurance premiums amounted to Sh130.84 billion, with medical and motor insurance classes contributing 33.0 per cent and 34.4 per cent, respectively. Motor Commercial gross premiums decreased by Sh1.97 billion, while Personal Accident premiums decreased by Sh1.17 billion.
The global socio-economic shocks from the COVID-19 pandemic continued to be felt during the quarter under review. Insurers reported claims incurred amounting to Sh57.36 billion, a decrease of 0.4 per cent from Sh57.60 billion reported in the fourth quarter of the previous year.
Medical, motor private, and motor commercial had the highest amounts of paid claims at 37.7 per cent, 26.0 per cent, and 22.7 per cent, respectively, of total industry paid claims under general insurance business.
Meanwhile, the National Treasury, in consultation with the Insurance Regulatory Authority, is considering an insurance sector overhaul to woo investments. The National Insurance Policy aims to strengthen the existing industry policies, legal, and regulatory environment for the insurance sector in Kenya.
