Inefficiencies and failure to ride on digital investments could undermine the insurance sector’s transformation plans, industry experts now warn.
This, as Kenya and other African markets continue to push for increased insurance penetration.
Insurance penetration in Kenya hovers between 2.2 per cent and 2.7 per cent of the Gross Domestic Product (GDP), which sits significantly below the global average of roughly 7.4 per cent.
Average insurance penetration in Africa sits between two per cent and three per cent, significantly trailing the global average with only South Africa being a major outlier, boasting an exceptionally high penetration rate exceeding 11per cent, while the rest of the continent remains heavily under penetrated.
This low rate is primarily driven by limited disposable income, a poor savings culture, and public mistrust stemming from complex policies and slow claims processing.
While insurers across Africa have invested heavily in digital transformation over the past decade, industry leaders said many firms are yet to realise the full benefits of those investments, with significant value continuing to leak across underwriting, claims management, distribution and customer service functions.
Speaking at an InsurTech forum in Nairobi, Deloitte East Africa Partner Timothy Machira identified execution as one of the biggest challenges facing insurers.
“Many organisations have strong strategies and ambitious transformation plans, but the real challenge lies in translating those plans into measurable business outcomes,” he said.
According to industry leaders, insurance companies continue to grapple with high customer acquisition costs, low penetration rates, fraud, inefficient claims processes and weak customer retention.
Experts equally argue that technology alone will not solve the problem unless it is deployed to address customer pain points and improve business performance.
Apollo Investments Limited Group CEO Ashok Shah noted that the sector is entering a new phase of transformation driven by artificial intelligence, data analytics and digital technologies. However, he cautioned that insurers must avoid pursuing innovation for its own sake.
“The future belongs to organisations that combine innovation with a deep understanding of customer needs. Technology creates opportunities, but sustainable growth comes from solving real customer problems and building trust,” he said.
One of the key concerns raised at the forum was the industry’s tendency to focus on activity metrics rather than value creation, amid calls for a shift towards measuring profitability, customer lifetime value, claims efficiency, retention rates and returns on technology investments.
Industry experts say insurers lose substantial revenue through fraud, inaccurate risk assessment, manual processes and fragmented data systems, with AI increasingly being viewed as a solution capable of reducing these losses while improving operational efficiency.
The adoption of AI-powered underwriting tools, fraud detection systems and automated claims processing is expected to help insurers lower costs and improve customer experience.
ICEA Lion Group CEO Philip Lopokoiyit said digitising the entire insurance value chain presents one of the greatest opportunities for growth.
From customer on-boarding and policy issuance to claims settlement and after-sales service, digital tools can help insurers reach more customers while reducing operational expenses, industry experts say.
“The organisations that succeed will be those that use data, digital capabilities and AI not only to automate processes but to better understand and serve their customers,” said Lopokoiyit.
The growing number of digitally connected consumers across East Africa is also creating opportunities for insurers to design more relevant and affordable products.
Industry leaders believe technology-enabled distribution channels can help expand insurance access to underserved populations, particularly among younger consumers and small businesses.
However, increased use of data and artificial intelligence is bringing new risks with sector players being urged to adopt strong governance frameworks, data protection measures and ethical AI practices to maintain consumer trust and comply with regulatory requirements.
