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DEVELOPMENT OF UNIT LINKED BUSINESS IN KENYA Presentation to The Actuarial Convention 2008

DEVELOPMENT OF UNIT LINKED BUSINESS IN KENYA Presentation to The Actuarial Convention 2008. By Abed Mureithi The Actuarial Services Company 27 June 2008. Functions of Insurance. Core Insurance functions

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DEVELOPMENT OF UNIT LINKED BUSINESS IN KENYA Presentation to The Actuarial Convention 2008

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  1. DEVELOPMENT OF UNIT LINKED BUSINESS IN KENYAPresentation to The Actuarial Convention 2008 By Abed Mureithi The Actuarial Services Company 27 June 2008

  2. Functions of Insurance • Core Insurance functions • Risk Management – Charge premiums from a pool of insured to pay for expected claims from few individuals. Must price risk appropriately and reasonably • Investment – Receive premiums in advance before paying out claims and maturities – Free float for investment

  3. Unit – Linked Policies • Benefits based on the value of units purchased • Unit value growth linked to underlying index or asset • Relatively recent in Kenya • Kenyan context – More appropriate term would be unitised business • benefits are guaranteed at a basic sum assured

  4. Key Features • Greater flexibility for policyholder on investments • Lower or “no” guaranteed benefits • Transparency/ more information on benefits • Combination of Insurance and Investment Benefits

  5. Challenges in Unit Linked Business • Legislative • Marketing/ Policy holder Expectations • Investments • Disclosures

  6. Legislative • No specific legislation governing Unit-Linked Business • Investment Restrictions • Local offshore exposure • Admissibility of assets • Unclear Reserving Requirements

  7. Marketing/ Policy Holder Expectations • Sales Agent Marketing Strategy • High Commissions – upto 40% in first year • Limited Financial Planning Advice by Sales Agents • Low value for money – Low surrender values • Uncompetitive vs unit trusts • Litigation risk

  8. Administration • Miscalculation of Unit Values • Poor administration systems • Non-disclosure of material information • Response delays

  9. Opportunities • Banc assurance marketing • Britak, Equity Bank • Coop Insurance, Coop Bank • Jubilee, Diamond Trust Bank • ICEA, NIC Bank • HIV/ AIDS product • Easy adaptation of unit-linked policies to cover HIV/ AIDS related conditions

  10. Opportunities • Direct Sales • Most profitable but with competitive pricing • Tele Sales • Focus on Investment • REITS • Equities • Offshore

  11. Conclusion • Unit-Linked business relatively new concept • Significant Challenges in the Kenyan market • Opportunities exist for the future

  12. 10th Floor Victoria Towers, Kilimanjaro Avenue, Upper Hill Nairobi KenyaPO Box 10472-00100, Nairobi GPO Kenya, Tel: +254 20 2710028 Fax +254 20 2726844, actserv@wananchi.com

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