Banks get in on insurance action with improved risk models

Written by Oral East Africa

Banks have spent billions of shillings on new technologies to help them make faster lending decisions while minimizing the risk of defaults.

Now this same tools are proving useful in a new business segment helping fuel the growth of Bancassurance businesses in Kenya.

Kenya is witnessing a burst of Bancassurance business as bankers shift focus on subsidiaries chasing non-funded income growth from alternative sources.

Lenders like Family Bank have made strides into the insurance market to diversify their portfolio through bancassurance arm by taking on industry and leveraging their customers to grow market.

Family Bank offers motor, medical, personal accident, home insurance, life and an educational plan in partnership with top insurers in the country. The lender also offers livestock and marine to cater for the specialized markets.

Bancassurance, the partnership between Banks and insurance companies to provide distribution channels has been spun off as a new business line that is growing on the potential for embedding insurance into banking products like asset finance, loan and savings.

The entry on insurance into banking halls that were undergoing their own forms of technological transformation is set to unlock bancassurance and propel it to the future.

As banker upgrade their systems to include Artificial Intelligence and machine learning models, the sector promises to benefit from AI driven underwriting that makes more accurate risk assessments as well as price microfinance better to penetrate the mass market.

Banks are integrating insurance products into mobile apps, deploying chatbots to manage customer feedback and inquiry, unlocking micro-insurance covers like funeral covers, health insurance via USSD codes or mobile apps and introducing Artificial Intelligence to analyze customer data and recommend personalized insurance products.

Banks are also avoiding the biggest pitfall in Kenya’s insurance sector which is the widespread fraud. Applying fraud detection algorithms help reduce false claims.