The Kenyan insurance industry had a premium income of 55.19 billion shillings in 2008. General insurance premiums amounted to 36.89 billion shillings while long term business accounted for 8.30 billion shillings. The penetration of insurance at 2.63% of the GDP is very low compared to other countries in Africa such as South Africa which has a penetration of 9.94%. In Malaysia, it is estimated that 41% of the population have some form of life insurance in comparison to Kenya that has less than 1% of the population insured.

In Kenya almost all the premium income is generated through intermediaries (brokers and agents). This is in contrast to other countries that have a variety of distribution channels. The table below gives an illustration of the growth of alternative distribution channels in Malaysia for from 2002 to 2005.

Table: Market share of distribution systems in Malaysia (2002-2005)

The traditional agency channel will remain an important distribution channel for insurance companies. Experience so far in Malaysia shows the bancassurance channel has its strength in distributing short to medium-term single premium products. For regular premium products, the agency distribution channel is still the dominant channel. This is due to the complexity of regular premium products which the agency channel currently has a relative advantage in terms of experience and knowledge over their Bancassurance counterpart. For the life insurance industry in Malaysia, the Bancassurance market share of total new business premium increased from 2% in 1994 to 42% in 2008.

Apart from using brokers to agents, the other possible distribution channels include direct sales personnel, in-house business, direct-mail, internet/online channel, counter sales, telemarketing/call centers and Bancassurance.

The recent developments in technology and communication need to be harnessed for the insurance industry to grow. The concept of purchasing through the internet is relatively new but has gained acceptance worldwide especially in service industry products. More customers are using the internet to buy airline tickets, pay bills or make hotel reservations anytime of the day worldwide.

Direct channels offer the opportunities of lower cost and more value added services to customers. Given the importance of distribution channels, it was important to conduct a detailed investigation on the current and potential channels of distribution for insurance products in Kenya.

It was with this background that AKI wished to carry out a research to establish potential distribution channels that insurance companies can use in marketing their products. The Association is concerned about the low uptake of insurance and considers the lack of diversity in distribution channels as a major hindrance to the growth of insurance business.

AKI commissioned SBO Research to conduct a survey aimed at providing guidance in development of strategies to improve the growth of insurance business through new channels development.

Click Here for the Executive Summary of the final research report