Effect Of Distribution Channels On Insurance Penetration In Kenya

Abstract

Insurance penetration in Kenya is still low and this has been attributed to low level of awareness in the market about its benefits and the misconception that insurance is only for the affluent members of society. The insurance sector in Kenya has traditionally been broker driven with over 80% of the non life business procured through brokers and a few independent agents. Regrettably, these intermediaries are concentrated in the major towns and largely lack the capacity to service large areas of the countryside. The general objective of this study was to determine the effects of distribution channels on insurance penetration in Kenya. This study was led by the following specific objectives: determining the effects of intermediary channels on insurance penetration in Kenya; establishing the effects of direct distribution channel on insurance penetration in Kenya; and determining the effects of internet based channels on insurance penetration in Kenya. The study adopted a descriptive research design targeting 51 underwriting managers in all insurance companies in Kenya. The study collected primary data using a semi structured questionnaire. The collected data was analyzed using mean, standard deviation, frequency distribution and percentages. The analyzed data was presented using tables and figures. The study found out that continued use of in-house agents, continued use of freelance sales agents and continued sale of insurance through insurance company branch network had improved insurance penetration in Kenya, direct distribution channel was a strategy that would help gain market penetration, using direct distribution channel for personalizing insurance products does well for sophisticated customers, direct distribution channel alleviate fears caused by a misconception of the insurance industry and direct channel creates awareness of insurance products to the market hence increase penetration and distribution of insurance products through internet based channels had improved gross premium underwritten, distribution of insurance products through internet based channels had created flexibility in applications, distribution of insurance products through internet based channels had enabled close monitoring by customers and the increase in mobile internet enabled phones had improved the uptake of insurance. The study concludes that intermediary channels are very important in enabling insurance companies widen their market through market penetration due to customer demand, direct distribution channel strategy help gain market penetration, does well for sophisticated customers, alleviate fears caused by a misconception of the insurance industry and internet based channels helped the insurance companies to distinguish themselves from their competitors through enabling mobile, online, e-marketing, telemarketing and branchless insurance for the customers. The study recommends that insurance companies should continue engaging the services of intermediaries in order to reach the large population of uncovered pool, direct distribution channel as a strategy of increasing insurance companies’ services and products should not be limited to the customers visiting the companies and its branches but they should diversity to capture the wider market such as people who are not in their existing customer’s database and although internet based channel has been able to reach wider market within short period and less costs there is also need for the insurance companies not to depend entirely on internet based channel distribution and marketing channels since majority of the Kenyans live in remote areas where technology has not taken root.