Kenyan small and medium-sized enterprises (SMEs) are being urged to view insurance as a crucial tool for growth and resilience. According to Cecilia Makau, protecting investments in businesses is not simply a cost, but a necessary step in creating a resilient business that can survive setbacks. With many Kenyan SMEs facing significant risks, insurance can play a vital role in mitigating financial shocks.
The current state of insurance uptake among Kenyan adults is a concern, with only 6.3 percent using insurance products in 2024, against a target of 50 percent by 2028, as outlined in Kenya's National Financial Inclusion Strategy 2025–2028. This low uptake means that many businesses and individuals have limited capacity to absorb financial shocks, making insurance a critical consideration for SMEs.
For SMEs, being uninsured does not eliminate risk, but rather means that the business retains the financial consequences when something goes wrong. For example, a manufacturer relying on a critical machine is at risk of significant losses if the equipment is destroyed or suffers a major breakdown. Insurance products such as property, machinery breakdown, and business interruption cover can help cushion such losses.
The need for insurance is not limited to traditional sectors, but also applies to businesses in the digital economy. As SMEs adopt mobile payments, e-commerce, cloud systems, and digital platforms, they are exposed to new risks such as cyber fraud, data breaches, and operational disruption. Insurance can form part of a wider risk-management framework, but it cannot replace good cybersecurity, employee awareness, or sound internal controls.
Insurance products can also help SMEs manage risks associated with key personnel, such as the loss of a technical expert or an employee responsible for important customer relationships. Key-person insurance can provide a financial cushion while the organization adjusts to such a loss. Furthermore, insurance can be considered alongside financing, cash-flow management, and business continuity, rather than as a separate compliance exercise.
The insurance market in Kenya is evolving, with bancassurance channels showing significant growth. Data from the Association of Kenya Insurers shows that gross written premiums distributed through bancassurance rose from Sh19.5 billion in 2019 to Sh35 billion in 2023. This growth highlights the importance of financial institutions in insurance distribution, but also underscores the need for better understanding of insurance products among SMEs.
To maximize the benefits of insurance, SMEs need to understand what a policy covers, what it excludes, and how much protection is appropriate. Insurance should be integrated into business planning, rather than treated as an afterthought. By recognizing the importance of insurance, SMEs can ensure that they are better equipped to manage risks and achieve long-term growth and resilience.
Key points
- Insurance can help Kenyan SMEs mitigate financial shocks and manage risks associated with key personnel, cyber threats, and business interruption.
