Why banks hold the key to fixing Kenya’s insurance trust issue

Trust is the bedrock of economic growth, the efficient functioning of institutions, and social cohesion. In financial services, it is the invisible currency that underpins every transaction.

Yet, in many markets, trust remains fragile, particularly in insurance, where perceptions of opacity, cultural skepticism and past disappointments continue to erode confidence.

Kenya’s insurance sector illustrates this reality vividly. For decades, penetration has lagged peer economies. As of the financial year 2024, the country’s insurance penetration stood at 2.4 percent, according to the Insurance Regulatory Authority (IRA), a figure well below the global average of seven percent reported by the Swiss Re Institute.

Negative consumer experiences, delayed claims, opaque terms and insufficient disclosure have entrenched the notion that insurance is an unnecessary expense rather than a vital safeguard.

The industry must urgently confront these cultural weaknesses. Transparency, simplified products and customer-centric claims management are non-negotiables.

But perhaps more importantly, the sector must rethink distribution by borrowing credibility from institutions that already command trust, i.e. banks.

Unlike insurers, banks are deeply embedded in everyday financial life. Customers entrust them with salaries, mortgages and investments, reflecting a long-standing confidence in their ability to protect and manage assets.

This reservoir of trust presents an extraordinary opportunity for bancassurance. By leveraging the credibility banks already enjoy, the sector can reposition insurance as a natural extension of financial planning rather than a reluctant afterthought.

According to the data from Association of Kenya Insurers, bancassurance premiums expanded from Sh19.5 billion in 2019 to Sh35 billion in 2023, a 79.4 percent increase. Over the same period, Bancassurance distribution captured a larger market share, rising from 8.4 percent to 10 percent.

While correlation does not imply causation, the evidence strongly suggests that when insurance is offered through trusted intermediaries, adoption increases.

The advantage extends beyond distribution. Banks hold unmatched insights into customer life cycles and financial behaviour. This intelligence, applied responsibly and with respect for data privacy, can enable banks to recommend insurance products that are both timely and relevant.

For instance, a young professional opening a salary account can be introduced to affordable health coverage, while a mortgage holder can seamlessly be guided toward property protection, essentially considering a consumer’s full ecosystem and bundling relevant insurance products with the banking service they are seeking.

In such cases, insurance ceases to feel like a gamble and instead becomes a rational, personalised safeguard.

Equally vital is customer education through workshops, digital platforms and direct engagement. Banks are uniquely positioned to demystify insurance. By explaining claims processes clearly, highlighting success stories and demonstrating the tangible benefits of coverage, banks can reframe insurance as a tool for resilience rather than a reluctant obligation.

Globally, bancassurance has proven transformative.

In Europe, for instance, it became the dominant distribution model precisely because customers were more willing to buy insurance from their banks than from little-known insurers (Ernst & Young, 2021), and Kenya’s banks can emulate this success.

The writer is the CEO, Trade Catalyst Africa.