Sustainable life insurance is an essential tool for ensuring long-term financial security while promoting environmental, social, and economic well-being. In Kenya, the demand for life insurance is slowly growing, with more people understanding its importance in securing their families’ futures. However, implementing sustainable life insurance and insurance products designed to meet long-term societal needs while minimizing negative environmental impacts faces several challenges.
One major challenge is low insurance penetration. Despite efforts to grow the insurance sector, Kenya’s insurance penetration rate remains at around 2.4% of the GDP, according to the Insurance Regulatory Authority (IRA). This is significantly lower than the global average of 7.4%. For life insurance specifically, many Kenyans still view it as a luxury rather than a necessity. This perception makes it difficult for insurance companies to introduce sustainable policies that may have slightly higher premiums due to their broader impact.
Another challenge is limited public awareness and education. Many Kenyans, especially in rural areas, lack a clear understanding of how life insurance works and how it can benefit them. Sustainable life insurance, which may include features like green investment funds or community-focused benefits, can seem even more complex. Without proper education campaigns, people may remain skeptical or uninterested in these products.
Affordability is also a key obstacle. A large portion of Kenya’s population lives on low incomes, with about 15.9% living below the poverty line, as reported by the Kenya National Bureau of Statistics. For many families, basic needs like food, housing, and education take priority, leaving little room for life insurance premiums.
The informal economy, which accounts for about 83% of Kenya’s workforce, poses another hurdle. Many people working in this sector do not have stable incomes or formal financial records, making it difficult for insurance companies to assess risk and offer tailored products. Sustainable life insurance, which often incorporates longer-term benefits, requires a reliable premium payment system, which can be challenging in this context.
Insurance companies also face regulatory and operational challenges. While the government has made efforts to support sustainability in various sectors, the insurance industry still lacks specific policies and incentives to promote sustainable life insurance. Additionally, implementing sustainability-focused products often requires significant investment in technology, training, and marketing, which can strain resources for many Kenyan insurers.
Another issue is the impact of climate change. As Kenya experiences more frequent and severe droughts, floods, and other environmental challenges, insurance companies are under pressure to incorporate these risks into their policies. Balancing affordability with the need to account for these risks is a delicate task. For example, providing life insurance coverage in regions prone to climate-related disasters may require higher premiums, which can discourage uptake.
To overcome these challenges, a collective effort is needed. Insurance companies must invest in public education to demystify life insurance and its benefits. The government can play a role by offering incentives, such as tax breaks, for sustainable insurance products. Partnerships with community organizations and financial technology companies can also help expand access to insurance for low-income and informal sector workers.
