Effect of Islamic Insurance on the Growth of the Insurance Industry in Kenya
Abstract
The Kenyan insurance market wrote KES.100 billion of Gross Direct Premiums in the year 2011. It has grown at an average rate of 16% p.a. over the last 5 years. The market comprises of 47 insurance companies, transacting long-term and short-term insurance business. In addition, there are over 140 insurance brokers operating in the Kenyan insurance market. In Kenya the penetration rate is 3% for a population of 40 million while India at 4% penetration for a population of over a billion and contrasts with South Africa with a penetration of 16% for a population of 50 million. This shows the importance of having an insurance sector which can add more to economic development of the country, which signifies a huge potential for the insurance business in the country. The industry’s insurance premiums grew by 16.4% during the first quarter of 2015. The 2015 quarter one premiums stood at KES 50.41 billion growing from KES 43.29 billion. The premium income reported under life insurance business amounted to KES. 15.98 billion while general business premiums were 34.43 billion. This study aimed to establish the effect of Islamic Insurance (Takaful) on the growth of the insurance industry in Kenya. The study aimed to fulfill following objectives; to find out the effect of General Takaful on the growth of insurance in Kenya, to establish the effect of Family Takaful on the growth of insurance in Kenya, to determine the effect of health takaful on the growth of insurance in Kenya and to investigate the effect of Re-Takaful on the growth of insurance in Kenya. This study adopted a descriptive design. The population of this study was all insurance companies in Kenya. Purposive sampling was used to select the insurance companies that offer Islamic insurance (Takaful) products. There is only one Insurance company Islamic insurance products and that is Takaful Insurance of Africa which began its operations in Kenya in 2011. Takaful Insurance of Africa sells its policies directly or through agents, brokers and commercial banks. The study used secondary data from insurance companies from 2011 when the first insurance company (Takaful East Africa) begun offering Takaful products, to 2015. Data was analysed using Statistical Package for Social Sciences (SPSS). Results showed that there was a significant positive relationship between Islamic insurance and the growth of Kenya’s insurance industry. Specifically, it was found that general re-takaful had the greatest impact on insurance growth with family takaful having the least effect. This study recommends that industry players invest more in marketing as well as innovation to come up with a wider range of general takaful products and to increase awareness in the market to increase its uptake. Family Takaful has been found to be the least consumed Islamic insurance product. There are still a lot of opportunities in Kenya for this kind of product. Industry players should increase the awareness campaigns to increase its uptake. The majority of Kenyans still do not have medical insurance. This study recommends that Islamic insurance companies ought to take this advantage and invest more on the campaigns to sell health insurance to Muslims and non-Muslims alike. The study therefore recommends for the formation of a fully-fledged reinsurance company for takaful products.
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DOI: http://dx.doi.org/10.61426/sjbcm.v4i2.468
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