Extensive branch network, 120 years experience, strong ICT platform and product flexibility puts the KCB Group at a competitive advantage in underwriting MCI.
KCB Insurance has positioned itself to play a significant role in the provision of marine insurance solutions to the Kenyan importers and exporters following a government directive that came into force early this year. The Treasury Cabinet Secretary, Mr Henry Rotich, in his 2016-17 budget speech directed full enforcement of Section 20 of the Insurance Act, which requires all importers to demonstrate procurement of marine insurance from local insurers before cargo clearance, a requirement that was often ignored.
KCB Insurance, the arm of KCB Group that offers insurance and risk management services to its customers since 2010 now hopes to tap more business from the over Kshs. 20 billion a year market the country has been ceding to foreign insurers in form of premiums.
The Bank, which is undoubtedly the leader in trade finance to importers in Kenya and the region- providing all-inclusive solutions that include lending to facilitate trade across international borders and securing insurance for all logistics needs see this latest move as a huge boost to the country’s insurance industry, economic growth in general and creation of new jobs.
In recent years, financial institutions, and more so banks, have embraced the concept of Bancassurance as a way of expanding their non-funded income streams. Bancassurance simply refers to the distribution of insurance products by banks. In this arrangement, insurance companies partner with banks to sell insurance products to the Bank customers.
“We seek to understand the nature, operations and industry that our customers operate in and craft relevant covers for either imports or exports. Then, we negotiate covers on “All Risks basis” during the international transit and arrange a comprehensive marine cover,” Ms Winnie Njau-Mbugua, the head of KCB Insurance said in a recent interview, adding that KCB possesses extensive experience and technical expertise to develop customized marine insurance solutions to meet specific and diverse needs of its customers’ businesses.
The main objective of purchasing marine Insurance is to mitigate against risks associated with both sea and air shipment. The policy typically covers the cargo, freight cost, other incidental costs such as clearing cost and, liability to third parties but may be extended to cover loading and off-loading risks. The scope of the perils covered is dependent on the insurance package taken and the risks covered by marine underwriters include sea carriage, inland transit cover for both the imports and exports, warehouse to warehouse cover, cover for any incidental storage in the course of transit or deferred unpacking of the goods and cover for movement of goods traded internationally or domestically.
As one of the few insurance intermediaries operating in Kenya with a nationwide foot print, KCB has a competitive edge over the others. The ease of accessibility through its branch network across the country enhances the group’s ability to serve the entire country.
“In any KCB Bank branch that you walk into anywhere in the country, we have a functional insurance desk where all your insurance needs will be taken care of. Our insurance business operations offer multi-product lines and our speciality lines include high capacity coverage for marine cargo insurance amongst others,” Ms Njau said.
KCB Bank is Eastern Africa’s oldest and largest commercial bank with a strong heritage spanning over 120 years. Thus, the customers enjoy the confidence of knowing that they are dealing with a financial institution with the best brand reputation in Africa and longevity. The bank has unrivalled branch presence not only in Kenya but within the wider East African Region.
“We have reputable underwriting partners who understand the complexities of the Kenyan insurance industry, have a proven ability to manage risks and a credible history of sound claims settlement,” Ms Njau said.
“KCB is fully prepared to handle marine insurance of any volumes that comes its way at competitive rates that match the international standards.”
KCB Insurance offers Insurance Premium Financing to its customers through the bank’s network in order to ease the burden of having to pay insurance premiums as one lump-sum payment therefore giving customers a convenient one stop shop and access to a wide range of financial services.
Another distinct advantage of KCB Insurance is the use of an integrated robust ICT platform, which has a profound impact on how the organization has been able to deliver its products and services as well as respond to customer needs.
“As KCB Insurance, we have fully automated our processes and integrated our systems with the bank’s systems to ensure that our customers enjoy seamless service from end to end at any of our branches,” Ms. Njau said.
Therefore, the bank’s customers who are in the import and export business are able to obtain financing from KCB Bank Trade Finance Department for purposes of purchasing goods from overseas markets and at the same time obtain insurance to cover the goods en route final destination in Kenya.
“Through linkages with other service providers, we have access to an integrated online portal used by our insurance partners for real time issuance of marine covers which automatically updates the insurer of any covers we issue on their behalf,” Ms. Njau added.
Apart from recouping billions annually ceded to foreign insurance firms, buying insurance from local underwriters has many other advantages. Importers have the advantage of being able to seamlessly and effectively lodge and follow up their claims locally with underwriters who are accessible.
“This makes the process fast and more effective as opposed to dealing with an insurance provider who is out of reach where the client had no relationship whatsoever but could only pursue their claim through the vendor,” Ms Njau said.
Since licensing about seven years ago, KCB Insurance has been offering marine insurance to its customers amongst other products by facilitating them to purchase marine insurance locally as one of its core value propositions. This convenience is premised on satisfactory and personalized responses to queries, negotiating for the most comprehensive and competitive covers available in the market that match international best practice, speed in policy processing and ability to effect amendments to the cover within short notice, and giving customers a piece of mind that they are fully covered.
“Our customers noticed that our product scope was wider and customized to their unique needs when compared to blindly accepting covers provided by the overseas markets through suppliers” Ms Njau said.
In operationalizing section 20 of the Insurance Act, Treasury did not intend to give local insurers an opportunity to exploit consumers on pricing. Therefore, in a bid to protect the interest of consumers, the Insurance Regulatory Authority (IRA) provided a guiding rate to the insurance industry that benchmarks favorably with rates charged by overseas underwriters. In any event, the local underwriters naturally use the same global reinsurance firms customarily used by overseas insurers hence pricing models would generally be similar.
“So far, we have had no uproar from the market on the issue of pricing and therefore are convinced that the competitive rates offered by the local market augur well with the global insurance industry trends,” Ms Njau said.
Kenya is on the verge of its biggest construction boom with many multi-billion shilling infrastructure projects undergoing implementation to fuel the country’s economic growth. The majority of these works straddle rail, road, housing, port, energy, oil and gas projects. The insurance industry will now get a fair opportunity to play a major role in the country’s economic growth.
“In order for stakeholders to ensure that things do not go back to the poor state of repatriating premiums, the Treasury, Kenya Revenue Authority (KRA), IRA and all other stakeholders must work together and show that our industry has capacity, is price competitive and meets international standards in the quality of service and scope of cover issued to the market,” Ms Njau added.
To safeguard smooth implementation of the directive further, it is imperative that the insurance regulator equally formulates necessary guidelines to regulate the underwriting and provision marine insurance covers in the Kenyan market and forestall any foreseeable abuse of the process or malpractices, Ms Njau observed.
“This should include the timelines for settling valid marine insurance claims. The KRA needs to equally enable seamless integration of the underwriters’ online portal(s) to their system to facilitate the efficient upload of marine insurance certificates by the various marine insurance providers,” Ms Njau said.
Promoting local marine insurance has various other benefits. When insurance is placed locally, then it becomes much easier for the different stakeholders to accurately capture, monitor and share data. For the year 2017, it will be much easier for stakeholders to analyze reports on economic development and international trade by analyzing data collected from KRA, IRA, AKI and the insurance industry at large. There is a close link between marine insurance and economic prosperity.
The Insurance premium collected will equally avail substantial funds to banks in form of deposits to enhance their capacity to finance various projects in the country and the ripple effects of this additional liquidity are definitely going to leapfrog the growth of the financial services sector.
Insurance will give confidence to the business community to engage more in international trade. This translates to more investment, job creation, increased industrial production, increased incomes, increase in consumption of goods and services all of which contribute to improved quality of life.
The enlarged marine insurance market is expected to change the dynamics of the insurance business in Kenya with the ultimate outcome expected to be better penetration rate and expansion of our market to provide specialist marine cargo underwriting in line with international best practice.
“The increase in marine premium is expected to equally augment the finances of local insurance companies with the resultant impact being improved financial stability, enhanced liquidity and better solvency margins for marine underwriters,” Ms Njau said, concluding that a financially sound and stable insurance industry with greater capacity to underwrite bigger risks and retain more premiums locally reducing reinsurance cessions to global reinsurers will ultimately result in higher foreign exchange retention within the economy.