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Blue faces battle for Kenya
March 12, 2010
By Mzwandile Jacks
Blue Financial Services, the Johannesburg-based microfinancier, and Kenyan insurer Pan Africa Insurance are set to engage in a fierce fight for the Kenyan insurance market.
This emerged this week when Blue said it would introduce micro-insurance solutions to lower income earners in African countries including Kenya.
Pan Africa, formed to tap into the largely under-developed life assurance market in Kenya, said growing new distribution channels in the country for individual life products was one of its key objectives for this year.
Greg Niemand, an insurance director at Blue, said he was confident that operating in the rest of the continent would benefit Blue, its clients and the economies of the countries in which it operated. Blue operates in 13 African states.
Niemand said traditional insurers in the African market outside of South Africa had struggled to make an impact because they often applied traditional insurance rules in unconventional situations.
Niemand noted: "Offering micro-insurance products to lower-income earners presents major challenges to insurance providers. However, Blue has customised its product offerings to overcome these challenges."
According to Blue, the insurance needs of lower-income earners on the rest of the continent have been neglected in the wake of the global economic downturn.
Traditional insurers tend to avoid the African market as the risks and costs of operating are quite high.
One of the micro-insurance products Blue offers to lower-income earners in Africa is the Credit Life Policy, which is compulsory for those obtaining a loan from Blue.
According to Kenya's Business Daily, the Kenyan insurance companies were also searching for new distribution channels to cover a bigger market there.
This is because conventional agents for insurance companies - who are the face of the industry - have failed to make a meaningful impact on individual policy sales.
Revenue growth has been relatively slow in Kenya. Yet evidence based on the sales record of micro-insurance shows more Kenyans are ready for the services.
The paper said although the industry had consistently recorded growth in the past seven years, the gross premium volumes that topped 51.9 billion Kenyan shillings (R5bn) in 2008 were seen as too low for an industry with 43 players.
Tom Gitogo, the chief executive at Pan Africa, said growing new distribution channels for individual life products would be one of the key business growth plans for the group this year.
"(We shall) focus on our relationship with banks to provide insurance solutions to their customers," he said.
Life cover volumes remained at 1.5 billion shillings in the year to December 31, while corporate business grew by 50 percent to 1.5 billion shillings.
Gitogo said Pan Africa saw bancassurance - where banks distribute insurance products - as a major growth area for the industry.
To tap into this market, Pan Africa was now insuring unsecured loans and mortgages issued by banks.
Sammy Makove, the chief executive of the Insurance Regulatory Authority in Kenya, said plans to review the Insurance Act or introduce new regulations on distribution options were at an advanced stage.
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