Kenya’s life insurance industry poised for growth as new entrant pledges to invest Sh1.5 billion to consolidate business
Prudential Plc, Britain’s biggest insurer by market value, has shaken Kenya’s insurance market with the takeover of Shield Assurance Company Ltd. Prudential Africa immediately announced that it will invest Sh1.5 billion in the next one year to expand market share, signalling a bruising battle ahead for mainstream rivals.
With the changes, at least 500 customers of Shield Assurance have a reason to smile as Prudential has set aside Sh200 million to pay pending benefits. The buyer will honour legitimate claims by existing life insurance customers of Shield, which will trade under the Prudential brand.
The current Shield Assurance CEO, Mr Charles Mang’ee, will remain in his position while serving employees will be retained.
Kenya is the second African country the company is investing into after Ghana. Mr Mang’ee says Prudential will widen its offering and create innovative products as well as expand its distribution network to reach more customers across the country. Over the next 12 months, Prudential, founded in London in 1848, intends to invest in building a strong foundation for growth in the highly competitive insurance market with over 40 players. By 2020, the group projects to create 4,000 new jobs that will attract a mix of direct employees and self-employed agents.
Prudential has major operations in the UK, US and Asia and Nairobi will become the headquarters of the planned new East African division, enabling the group to contribute to tap the region’s rapid economic growth. Listed in London, New York, Hong Kong and Singapore, the insurer specialises in providing health and protection insurance, alongside long-term savings products for needs such as university education and retirement.
Mr Matt Lilley, CEO of Prudential Africa, says the acquisition is important as it represents the first step towards creating a new business in the East African region. “Kenya is a great place to do business,” he says.
Mr Mang’ee, who worked as a builder’s assistant digging trenches and carrying loads around construction sites at the age of 13, has gone through the difficulties of lack of school fees. And so he appreciates more the value of insurance which can enable children get through education, build better lives and play a role in driving development.
“Families are devastated financially after the loss of a breadwinner. The provision of a life insurance policy is a response to such a tragedy. Apart from being a modern tool for long-term investment and saving towards a specific project like buying a home, it helps the family to get back to its feet,” he says.
Insurance penetration in Kenya remains below 5%, more so life insurance which trends under 1%. “The life insurance industry in Kenya is small in global terms but is growing fast, as many more citizens come to realise the difference it can make to their lives,” says Mr Mang’ee.
Last year, 5,000 employees of Prudential around the world volunteered through a flagship international programme dubbed the ‘Chairman’s Challenge’. Prudential Kenya will also be part of that programme that will enable local employees to support and volunteer for good causes. T
This comes at a time when the life insurance market is said to be growing at a rate of 20% every year. “Our sector still represents a tiny fraction of Kenya’s rapidly expanding economy. Therefore, we see exciting opportunities to enable many more families to protect themselves against life’s misfortunes and save for long-term aspirations, such as education and retirement,” says Mr Lilley.
Insurance Regulatory Authority CEO Sammy Makove said Prudential will focus on life insurance business in the country, which has a current minimum capital requirement of Sh150 million. “Life insurance penetration is at less than 1%. With the entrance of Prudential, we expect this to improve. We are hoping they will bring international standards of this business which will contribute growth to the sector,” Mr Makove said.
Treasury has announced plans to introduce a new insurance law aimed at stimulating growth in the sector and increasing insurance penetration, which stood at 3.4% at the end of 2013. Treasury Cabinet Secretary Henry Rotich said the bill will focus on strengthening customers whom he says are still pessimistic about insurance companies.
