Kenyans have a talent for making technologies and new ways of doing business work where other markets have failed. Bancassurance – or collaboration and integration between banks and insurance companies – has been tried in many African markets. In Kenya it is increasingly central to insurance and has already driven a few high-profile takeovers. Vijay Srivastava, CEO of GA Insurance, told OBG, “Bancassurance is key to the growth of the insurance sector,” adding that it is standard for all major banks to have insurance agencies.

Bancassurance & Profits

Kenya Commercial Bank (KCB) said its KCB Insurance Agency earned KSh155m ($1.7m) in pre-tax profit based on KSh1.5bn ($16.5m) of premiums written in the year to December 2014, its first full year of operation; it has signed up to seven insurance underwriters. The unit was issued a licence in 2010 but only started operating in 2013. Equity Insurance Agency posted KSh396m ($4.4m) of profit, and NIC Bank said insurance activities added KSh26m ($286,000).

Other major banks with insurance operations include I&M Bank, which owns GA Insurance and has launched a bancassurance mobile app to inform customers of its I&M Insurance Agency, and Co-operative Bank, a major shareholder in CIC Insurance.

Others are following suit. Barclays launched its life assurance arm in April and in June announced a deal to buy 63% of general insurer First Assurance. Ecobank, through its EcoInsurance Agency, has joined with Old Mutual, UAP Insurance and Saham Insurance to offer life and general, similar to previous launches in Ghana and Nigeria. In August 2015 Ecobank announced a one-stop solution for small and medium-sized enterprises (SMEs) and urged business insurance to back its loan, finance and asset-finance offerings. Meanwhile, Standard Chartered Bank announced in June 2015 that it had set up the Standard Chartered Insurance Agency as a wholly owned subsidiary and signed non-exclusive distribution agreements with AIG Kenya Insurance and Pan Africa Life Assurance to sell insurance in branches. The agency offers general and life insurance policies, including endowment, education, funeral and mortgage protection insurance.

Insurers are also expanding their distribution through banks: life insurer British American Investments Company works with 13 banks and in July 2015 Jubilee Insurance announced a partnership with Rafiki Microinsurance Bank to distribute life products.

Standard Chartered Bank CEO Lamin Manjang forecast that insurance penetration would double in the next five years, driven by projected steady economic growth and the demands of a growing middle class: “Insurance is classified as one of the top five spend items for affluent and emerging affluent Kenyans.”

Squeezing Agents

Bancassurance is making life harder for Kenya’s estimated 10,000 insurance agents. The Association of Kenya Insurers mentioned claims that banks coerced customers to use their insurance agents and were limiting customers’ rights. The Insurance Regulatory Authority (IRA) reported that fewer agents were registering and more were dropping out of the industry in 2013, with 593 new agents (down from 1085 registered in 2012) and 1900 who left the industry (up from 758 in 2012). Washington Ndegea, chairman of the Bima Intermediaries Association of Kenya, blamed “agents losing business to banks, and this is causing agents to leave the industry in droves”.

Bancassurance will be boosted by the banks’ financial strength, which is increasingly essential as the regulator demands higher risk-based capital. As banks and mobile phone companies race to develop mobile payments and other technology solutions to reach into new markets, there will be many synergies in developing and marketing new insurance products. Banks also bring their branch networks, higher visibility and a greater degree of public trust into the mix.