Insurance customers in Kenya withdrew Sh13 billion from their policies in 2023, marking the highest cashout in two years and representing a 2.5-fold increase from Sh5.15 billion in 2022.
Withdrawals accounted for the majority of the cashouts, increasing 5.5 times to Sh10.23 billion, while surrenders decreased by 16% to Sh2.78 billion, as policyholders opted for partial withdrawals rather than completely abandoning their policies and incurring penalties.
The surge in withdrawals reflects growing economic hardships, with the 2024 FinAccess Household Survey revealing that 44.1% of insurance customers skipped premium payments by November 2024, while the overall insurance-using population declined by 130,000 to 1.77 million.
This trend is attributed to reduced disposable income resulting from new government deductions, including a 2.75% social healthcare levy, doubled National Social Security Fund contributions, and a 1.5% housing levy, combined with
inflation rates consistently exceeding wage increases for four consecutive years.
Kenya’s insurance industry’s sensitivity to macroeconomic restrictions is in line with a larger historical trend seen in developing countries during times of fiscal austerity, where insurance often acts as an informal emergency fund notwithstanding its intended use as a long-term financial safety net.
Comparative study of similar markets–especially Ghana and Nigeria during their respective periods of structural adjustment-showcases that insurance
policy withdrawals usually rise when several tax