Kenya’s biggest telecommunications firm Safaricom has received regulatory approval to offer insurance services after a four-year wait, giving it room to ride on its more than 33.5-million customers to deepen penetration of insurance in the East African economy.
Safaricom chief executive Peter Ndegwa announced that the Insurance Regulatory Authority (IRA) has granted it the green light and will be launching soon.
“Innovation remains critical. We have revamped our wealth proposition and have now received an insurance intermediary licence from the Insurance Regulatory Authority,” Ndegwa said.
“This will help us accelerate our rollout of our insurance solutions. We expect to roll out propositions in both wealth and savings but also insurance in the second half of this financial year.”
Safaricom’s financial year starts in April and ends in March, meaning that the telecommunications company, which is also engaged in the provision of text messaging, voice, data, internet and mobile money services, could launch insurance intermediary services within the next four months.
The telco had in earlier communication said: “Insurance, and in particular retail insurance, will be a focus as we endeavour to provide embedded insurance in our credit products but also scale in other insurance offerings.”
The telco, which is marking 24 years in existence, becomes the latest non-insurance firm to enter the underwriting business after two banks—Equity Group and NCBA Group—did so, upping the competition for insurance firms.
The telco has set up a subsidiary called Safaricom Insurance Agency Limited as a fully licensed agency through which it will be offering insurance services. Safaricom has started off with embedded insurance on devices sold through its channels.
Ndegwa said the new product aligns with the telco’s strategy to broaden M-Pesa into a financial service provider that responds to its customers’ “digital needs”. The company has been testing insurance products since 2020, awaiting regulatory approval.
The telco has a rich customer base of more than 33.5-million active users who transact more than KES1.74-trillion ($13.5-billion) monthly through its mobile money platform M-Pesa, giving it room to deepen insurance reach in the Kenyan market from the current under 3%.
Safaricom’s insurance product could be key in driving up insurance uptake, especially for people in the informal sector, by levering on data to offer micro-insurance.
Micro-insurance presents the most appropriate means for the insurance industry to resonate with the low-income earners, mostly working in the informal sector, as traditional risk mitigation measures such as social networks prove inadequate.
This group lacks appropriate mechanisms to control risks allowing losses to drive them into helpless situations and abject poverty given that they cannot afford conventional insurance products.
The impact of microinsurance is transformative, as it shields people with lower incomes from the economic shocks that would otherwise keep them locked in an endless cycle of poverty.
The microinsurance products are increasingly resonating with people at the bottom of the pyramid and those in the informal sector thanks to more affordable premiums, flexible payment terms pegged on customers’ cash-flow patterns and simple documentation.
The Association of Kenya Insurers (AKI), a lobby for underwriters in the East African economy, said in the report released last year that the number of microinsurance underwriters in the market has grown from 11 in 2015 to 18 in 2022, while the number of products has risen from 32 to 55.