Emerging risks driving the growing need for insurance

As risks become more complex and unpredictable, demand for comprehensive insurance solutions is growing.

Individuals and businesses alike are seeking coverage to protect against unforeseen disruptions, ensuring they can withstand shocks and recover quickly. For insurers, this shifting environment presents both challenges and opportunities, requiring them to anticipate emerging risks, innovate solutions, and remain agile in a rapidly changing world.

As critical risks drive the growing need for insurance, and insurers adapt to meet demands of an increasingly risk-conscious society, Kenya’s insurance penetration remains disappointingly low, fluctuating between just 2.3 per cent and three percent.

Demand for insurance is rising as global and regional risks continue to evolve, making financial protection more essential than ever.

Climate change and environmental risks

The increasing frequency and severity of extreme weather events such as floods, droughts, hurricanes, and wildfires, pose significant social and economic threats. This has compelled individuals and businesses to seek cover to mitigate property damage and business disruptions.

In regions such as sub-Saharan Africa, where agriculture is a key economic driver, unpredictable weather patterns threaten farmers' livelihoods.

Yet, agricultural insurance penetration remains low at just one percent, despite the sector’s vulnerability to climate change and market inefficiencies. Expanding insurance in agriculture is crucial to enhancing resilience, ensuring food security, and supporting sustainable development in affected regions.

Political unrest and economic instability

Political and economic uncertainty are other major factors driving the demand for insurance. They cause economic fragmentation which leads to trade disputes, and disruptions in supply chains.

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This results in lower economic growth and limited access to certain markets making it complex for the insurance sector to diversify risks.

Additionally, as economies destabilise, companies face greater uncertainty, which increases the need for tailored risk management solutions. This can be attributed to inflation leading to increased costs of claims, putting pressure on loss reserves.

Insurers must therefore adapt to the uncertain world by reassessing their strategies, innovating new products, and proactively managing risks to remain competitive and addressing the demand for business interruption insurance.

Public health crises and pandemics

The Covid-19 pandemic heightened awareness of health and life insurance, exposing vulnerabilities in existing coverage models. The rapid spread of the virus led to widespread economic disruptions, increased medical expenses, and heightened mortality rates—driving demand for comprehensive health and life insurance products.

However, many existing policies failed to cover the full spectrum of pandemic-related risks, leading to claims denials and customer dissatisfaction.

As the threat of emerging infectious diseases persists, insurers must develop robust health coverage and critical illness policies that address both immediate and long-term risks. The focus should be on designing adaptable products that provide security in future health emergencies.

Technological advancements

Technological innovations are reshaping Kenya’s insurance making products more accessible and appealing to a broader audience.

Artificial intelligence (AI), big data analytics, and digital platforms are enhancing customer experiences and operational efficiencies, driving greater insurance uptake.

As the world becomes more unpredictable, insurers cannot afford to remain passive. Addressing the dynamics of modern risks is essential to staying relevant and ensuring that businesses and individuals continue to benefit from financial security.

By adapting to emerging challenges and innovating solutions, the insurance sector can foster long-term resilience and support sustainable economic growth.

The writer is the Mombasa Branch Manager, Kenya Orient Insurance Limited