Why Kenya has few micro insurers

The Insurance Regulatory Authority (IRA) says it has rejected approval requests from several microinsurance firms because their products do not meet the threshold set for the low-income population.

The regulator says some of the providers are simply unbundling already approved conventional products and repackaging them as micro, which negates the sole basis of the 2020 regulations.

The Insurance (Microinsurance) Regulations, 2020, were developed to encourage firms to develop products that fit into the informal market and those from the lower strata of the economy.

However, challenges associated with the development of these products are the reason why only one out of six microinsurance firms licensed to operate in the market have their product approved.

IRA Senior Manager for Actuarial and Data Analytics Titus Osero said when the regulations were rolled out in 2020, firms which had microinsurance products were given three years to transition those products into their new subsidiaries.

These products and subsidiaries were to be approved and licensed by the regulator to ensure they align with the regulations.

“But there is a challenge which has been there. The microinsurance companies, because they are subsidiaries of their conventional parent companies, have refused to change,” he noted during a session with business journalists.

He said the microinsurance products were meant to embolden inclusivity. This meant that the firms developing the products ensure that their target market is Kenyans not covered by the conventional products currently in the market.

These products must also look into affordability for those targeted. “What companies are doing for microinsurance is they take conventional products, they reduce the benefits, premiums, but retain the exclusions and call it microinsurance,” said Mr Osero. “But is that microinsurance?”

He said the concept of microinsurance is that one has to identify a target population, scout the problem within that population and develop a product that offers a solution to that challenge.

“If you don’t do that, we will continue doing business the same way, where an insurance company sits in the office, develops a product and releases it to the market,” he said.

He said this is the reason why out of six licensed microinsurance companies, only one has its product approved. “The rest we have told them to go back) to the drawing board and do things differently from conventional insurance,” said Mr Osero.

During the 2023/2024 financial year, there was only one microinsurance firm licensed.

"Most of them have been licensed in the last quarter of 2024 and the beginning of this year. We expect we will see what they will be doing in the coming weeks,” said IRA chief executive and Commissioner of Insurance Godfrey Kiptum.

He said when the regulations came out in 2020, the regulator encouraged firms to form companies for the new venture.

The regulations define a microinsurance business as an insurance that is accessed by or accessible to the low-income population, including the underserved markets provided by a variety of entities and managed in accordance with generally accepted insurance principles.

Some of the aspects of a microinsurance product, according to the regulations, include daily premiums or contributions, which IRA says shall not exceed Sh40.

“The policy shall not provide for a change of the product’s features during the term of the contract,” the regulations add.

The regulations also provide that the contract term of the policy shall not exceed 12 months.

For a microinsurance product to be considered fit for the market, the regulator has to also approve the policy document, the sales plan specifying how the product will be marketed and distributed, copies of drafts of any agreements with intermediaries or persons who shall be involved in marketing and distribution of the product.

Mr Osero says in line with the regulations, the policy document should be in a simple language, insisting that the targeted market is neither tech-savvy nor sophisticated.

“Even the policy document should not be more than one page,” he said.

The regulations also attest to this. “A policy summary shall be no more than one A4 page with a minimum font size of 12 or in an electronic format that captures similar details that it would have if it were in paper form,” the regulations read.

According to the 2025 Economic Survey Report by the Kenya National Bureau of Statistics (KNBS), employment in the formal and informal sectors, excluding small-scale agriculture, went up from 20 million in 2023 to 20.8 million in 2024.

The total new jobs generated in the economy was 782,300 in 2024. The report notes a slowdown in the number of new jobs created in the informal sector, from 720,900 in 2023 to 703,700 jobs in 2024.

“The informal sector created 703,700 new jobs, which constituted 90.0 per cent of all new jobs created with the exclusion of small-scale agriculture,” the report says.

IRA Senior Manager Prudential Supervision Mary Nkoimu said the reason microinsurance regulations were necessary is because a majority of the Kenyan economy is domiciled in the informal sector.

“That is why we came up with the regulations, because products in the conventional market are not designed for that person in Gikomba, who gets their money on a weekly basis or that farmer who is paid a bonus after six months,” she explained.

She said if insurance was to be provided the conventional way for such a customer, the farmer as an example, if they do not pay in the second month, then their policy stands cancelled.

“The purpose of the microinsurance regulations was to encourage entities in that space to design products which match the needs of those people in the informal sector, in terms of affordability and aligning payments of premium with their cashflow,” she said.

During the rebrand of Britam Microinsurance to Britam Connect in March, IRA Director of Supervision Kalai Musee detailed how the regulator is keen on ensuring conventional firms detach themselves when coming up with products for the low-income bracket consumers.

This even goes into the individuals who should head the microinsurance forms which he said should be tech savvy and conversant of the consumption patterns of the informal market.

“I know when we were giving you the license, we had a lot of discussions in that respect. I can tell you, you brought names of people to approve and we rejected,” he detailed the interaction between Britam Connect and IRA during the licensing period.

“And it is one of the reasons the licensing was delayed the way it was, because we stood our ground. We said people in conventional insurance, no. We are not approving.”