Kenya's insurance sector is at a crossroads, facing intense pressure to fundamentally redesign its approach to the Public Service Vehicle (PSV) industry, a vital artery of the nation's economy that has been largely sidelined as a high-risk liability. The calls for innovation come as the sector grapples with a turbulent market, a legacy of collapsed underwriters, and the daily struggles of matatu owners squeezed by soaring premiums.

The core of the issue is the long-standing classification of PSVs as a perilous, unprofitable segment for insurers. This perception has led to a market dominated by a handful of players, sky-high premiums that eat into operators' livelihoods, and a string of insolvencies that have left policyholders exposed. For the thousands of Kenyans who depend on the matatu sector, the high cost of insurance is not an abstract figure; it directly impacts their daily earnings and ability to provide for their families.

A Market in Flux

The PSV insurance landscape has seen dramatic shifts recently. Africa Merchant Assurance (Amaco), a firm linked to President William Ruto's family, has more than doubled its market share to 37.5% by the end of 2024. This surge came largely at the expense of the long-time market leader, Directline Assurance, whose share fell from over 61% to roughly 48% amid shareholder wrangles. This shake-up occurred as Amaco also appeared to absorb clients from the collapsed Invesco Assurance, which went into statutory management in 2023, leaving operators scrambling for cover.

This concentration of risk into just a few hands worries operators. The Matatu Owners Association (MOA) has repeatedly urged the government to intervene and stabilize the sector, warning that the collapse of major providers poses a significant threat to public transport. The history is grim, with a graveyard of failed PSV insurers including Kenya National Assurance, United Insurance, and Blue Shield, which have gone under with billions of shillings in policyholders' funds.

The Squeeze on Matatu Owners

For a typical matatu owner, the financial pressure is immense. A 14-seater matatu can generate around KES 13,000 on a good day. After paying for fuel (KES 5,000-6,000) and the crew, the owner might be left with just KES 3,000. From this margin, they must cover maintenance, loan repayments, and steep insurance premiums that can run into tens of thousands of shillings annually, a cost that is set to continue rising.

"We are calling on the government to collaborate with us in finding solutions," noted MOA President Albert Karakacha in September 2024, highlighting the precarious position of owners. The sentiment on the ground is one of frustration, with many operators feeling they are being punished by a system that fails to distinguish between compliant and reckless drivers.

The Path to a New Model

The solution, experts argue, lies in innovation rather than avoidance. While the Insurance Regulatory Authority (IRA) is tightening governance with new draft regulations for 2025, a specific new framework for PSVs remains elusive. However, some insurers are beginning to adopt technology to better assess risk. Mention has been made of using in-car telematics to monitor driving habits and rewarding safe drivers with lower premiums. Others are pushing for cashless fare systems to streamline revenue tracking and reduce operational risks.

Newer, more agile players are also entering the market with tailored solutions. Definite Insurance, for example, is offering policies designed specifically for the PSV sector, focusing on customized coverage based on risk profiles and providing support like driver training to mitigate accidents. This approach marks a departure from the traditional one-size-fits-all model.

The challenge for the industry is to move from a blanket high-risk classification to a more nuanced, data-driven approach. As the IRA intensifies its crackdown on rogue insurers who fail to pay claims, the focus is shifting towards building a sustainable model that protects passengers, fairly prices risk for operators, and allows insurers to operate profitably. The road ahead requires a collaborative effort between regulators, insurers, and the matatu owners themselves to finally create a system that keeps Kenya moving safely and sustainably.