Challenges faced by Commercial Banks in the Bancassurance Market in Kenya

Abstract

The main objective of the study was to establish the challenges faced by commercial banks in the Bancassurance market in Kenya. The study was informed by the recent activities in this market that has seen banks being forced to seek insurance distribution channel expansion without compromising on their old traditional banking method. This is the reason why all the banking industry players are competing for the limited insured population that is estimated at less than 4% IRA, (2012). This means that the Bancassurance market share levels are still low leading to a cat throat competition from the industry players in a bid to capture the few insurable customers. In order to achieve the above, the study adopted across section survey research design as an efficient way to obtain information needed to describe views of various Bancassurance managers, to determine the challenges faced by commercial banks in this particular new market. The population of this study was drawn from the 31 locally owned commercial banks that are officially licensed by the Central Bank of Kenya and authorized by the Insurance Regulatory authority to transact Bancassurnce business. In Kenya, Bancassurance is governed by the prudential guideline on banking issued by Central Bank of Kenya, which became operational on 1st May 2010 and partially by insurance act. The collection of the primary data was done using structured questionnaires that were pilot tested in order to ensure that there was reliability The coding of data was done with use of Microsoft excel and SPSS so as to create the expressive figures like frequencies, as well as percentages. The outcomes were presented in forms of numbers as well as tables and pie charts. The findings on key challenges faced by commercial banks in the Bancsassurance market in Kenya revealed that amongst the major factors affecting Bancassurance market are economic, cultural, environmental, political, technological, market conditions, price wars and competition. The study findings reveal that highly rated challenges in this market are political instability, environmental changes i.e. global warming, drought, environmental destruction and inflation. Most of the respondents indicated lack of or poor technology. This study recommends that indeed the Banc assurance is a growing market as far as acceptance is concerned in terms of reaching out to customers. It is therefore important for the banks to consider adoption of the three major market share skills to increase banc assurance uptake. The findings on contributions of these key skills that increase the Banc assurance sales volumes in Kenya i.e. STP segmentation, targeting, positioning, revealed that respondents rated segmentation moderately, targeting highly and positioning moderately too. It is therefore evident that these factors are the major contributors to great achievements in this market. This study further show that other important factor enhancing Bancassuance uptake is product differentiation. The study hence suggests that the government policies should be aligned in a way that ensures there is room for commercial banks to explore means of continually developing and improving the performance of this particular sector, and find amicable solutions to its unique challenges