Education Insurance Policies Are the Biggest Regulated Scam in Kenya

A Nairobi woman recently posted a six-minute video to social media that deserves to be playing on loop in the boardrooms of every life insurer operating in this country.

In it, she describes how she lost Sh540,000 paid into Britam Holdings’ Akiba Savings Plan after she lost her job and could no longer sustain monthly premiums of Sh90,000.

When she escalated her case to Britam’s customer care desk, she was told her entire contribution had been forfeited. “Where did it go?” she asks, her voice breaking. “This was supposed to be an investment that makes profit.”

Where it went is not a mystery. Her money went exactly where the product was designed to send it. Into commissions, administrative charges, mortality cost reserves, and ultimately into the insurer’s bottom line.

Britam posted a pre-tax profit of Sh7.33 billion for the year ended December 2024, a 52 per cent jump from the Sh4.82 billion it recorded the previous year. The company holds 25 per cent of Kenya’s life insurance market for the eighteenth consecutive year. Business is spectacular. It always is when the product punishes the very income shock that most customers will inevitably face.

But this story is not only about Britam. It is about an entire industry, a regulatory architecture, and a financial culture that has for decades sold endowment and education insurance policies to Kenyan parents under the most emotionally manipulative pretences imaginable, while carefully concealing the structural realities of what those parents were actually buying.

“I personally lost 900k to the same Britam after contributing 30k a month for about 3 years. It is sold as an INVESTMENT, yet it is actually a policy — when you stop paying, you lose everything.” — Kenyan investor, social media

THE ARCHITECTURE OF THE TRAP

Let us strip sentiment from this and look at the structure of the product. An education endowment policy, offered under names such as Britam’s Boresha Elimu and Super Education Plus, Jubilee’s Career Life Plus, CIC’s Academia Policy, ICEA Lion’s Usomi Bora, Old Mutual’s Elimika, and Madison’s Bima ya Karo, is, at its core, a bundled financial product.

It combines a long-term savings commitment with a life insurance wrapper. Policy terms run from five to as long as twenty years. Minimum monthly premiums at most providers start from Sh3,000 and scale upward depending on the sum assured. At the upper end of the market, clients are committing Sh30,000, Sh50,000, even Sh90,000 per month for a decade or more.

Here is the critical detail that almost no agent explains at the point of sale: in most of these products, a policyholder who defaults before a specified threshold — typically the twenty-fourth or twenty-fifth policy month — receives nothing. Zero. Not a partial refund, not a surrender value, not an acknowledgement of the premiums paid.

The entire amount is absorbed. It is described in product documents, when they are disclosed at all, as an absorption into administrative charges, agent commissions, and mortality cost reserves.

In practice, this means a parent who commits Sh30,000 per month and loses their job after eighteen months has lost Sh540,000 with no legal recourse and no regulatory backstop.

A parent paying Sh50,000 per month who is retrenched after two years has lost Sh1.2 million.

These are not edge cases. They are predictable outcomes in an economy where formal employment accounts for only fifteen per cent of the total workforce of 20.8 million people, where real private sector wages declined in inflation-adjusted terms for the fifth consecutive year in 2024, and where sudden income disruption is not the exception but the condition of Kenyan economic life.

WHAT THE FIRST MONTHS OF PREMIUMS ACTUALLY BUY

The industry’s own internal logic reveals the deception. In the early months of any endowment policy, the client’s premiums are not primarily accumulating savings.

They are servicing the distribution infrastructure that sold them the policy. Agent commissions on life endowment products in Kenya are paid heavily in the first year, front-loaded to incentivise new business.

Administrative fees are deducted. Mortality charges for the attached life cover are levied. Only the residual portion begins to compound toward the eventual maturity benefit.

This means that a policyholder in their first two years is, in financial terms, primarily funding the system. Their money is paying the agent who signed them up, the overhead of the insurer, and a thin slice of actual savings.

The notion that they are accumulating an investment from day one is a fiction that is rarely corrected by the agent, who is compensated on new business written and not on policy persistency.

Industry insiders have confirmed for years what policy data would show if insurers were required to disclose it: lapse rates in the first two years of education endowment policies are substantial.

Agents are incentivised to sell without adequately stress-testing whether a prospective client can sustain premiums for five, ten, or fifteen years.

The IRA has issued fines to insurers for failure to honour claims, but has published no specific directive requiring insurers to illustrate at point of sale what a client would recover if they lapsed in the first twenty-four months. That gap in regulation is not an oversight. It is a structural benefit to the industry.

“I once tried to enlighten some policyholders that buying term life insurance plus a money market fund is a lot better than an education policy. I was told: ‘Please do not educate our stupid policy holders.'” — Industry practitioner

THE NUMBERS THE SALESPEOPLE WILL NEVER SHOW YOU

Let us conduct the comparison that every Kenyan parent considering an education policy deserves to see before they sign anything.

Assume a parent commits Sh10,000 per month for fifteen years. The insurer’s marketing material will show them a guaranteed lump sum at maturity, with loyalty bonuses and life cover built in.

What the marketing material will not show them is the opportunity cost of locking that money into a product whose real internal rate of return, after fees and charges, typically runs between five and seven per cent per annum.

The same Sh10,000 per month invested in a money market fund generating returns at the current average effective annual rate of around nine to eleven per cent, with complete liquidity and the ability to exit at any time without penalty, would over fifteen years substantially outperform the endowment product.

At peak Treasury bill yields in mid-2024, those instruments were returning as high as sixteen per cent.

Even accounting for the CBK rate cuts that have brought yields down in 2025, Kenya’s government securities market has consistently offered returns that dwarf the embedded return inside an education endowment policy, with zero lock-in, zero lapse risk, and no agent commission being deducted from the first shilling.

Edwin Dande of Cytonn Investments has made the point publicly and precisely: instead of an education insurance policy, buy Government of Kenya treasury bonds with ten, fifteen, or twenty-year maturity dates timed to when your child will enter secondary school or university. You receive biannual coupon payments as income throughout the holding period. Your capital is returned at maturity. Infrastructure bonds carry tax-exempt interest. There is no surrender clause, no lapse provision, no agent collecting a commission from your first twelve months of savings, and no call centre telling you your money has been forfeited.

The insurers know this comparison exists.

Their marketing, relentlessly emotional and emphatically vague on fee structures, exists precisely to prevent parents from making it.

THE PRODUCTS BY NAME

Britam’s Boresha Elimu Plan is marketed as a comprehensive, flexible education insurance solution aligned with Kenya’s new 2-6-3-3-3 curriculum. It offers three guaranteed lump sum payouts in the last three years of the policy term, which can run from six to eighteen years.

Premium waiver in the event of the policyholder’s death or disability is included. What the marketing does not foreground is that a client who stops paying before the twenty-fifth month has no cash value to recover, and that the premium waiver applies only in specified circumstances that explicitly exclude unemployment.

Jubilee’s Career Life Plus is positioned for parents targeting secondary and university education.

It carries an investment-linked component and offers loyalty bonuses for consistent contributors of over ten years.

It is an instructive product to examine precisely because it is marketed as investment-linked, a framing that implies equity participation and growth.

The reality is that an investment-linked endowment is still an endowment: the client bears the fee drag, the early-year commission deductions, and the surrender risk. The investment link does not convert the product from insurance into a transparent, liquid financial instrument.

CIC’s Academia Policy, Old Mutual’s Elimika, ICEA Lion’s Usomi Bora, and Madison’s Bima ya Karo follow substantially the same structural logic across different premium floors and term ranges. All combine savings with life cover.

All carry early-lapse provisions that can result in total forfeiture of premiums paid.

All are sold through agent networks that are compensated on new business and not on the long-term solvency of the client’s relationship with the product.

In each case, the accompanying money market fund product offered by the same institution would have delivered superior, accessible, and penalty-free returns for a client whose income ever came under pressure.

THE REGULATORY FAILURE

The Insurance Regulatory Authority operates under the Insurance Act Cap 487, with a statutory consumer disputes mechanism under Section 204A of the Act. Aggrieved policyholders can file written complaints with the Commissioner of Insurance, whose determinations are subject to appeal to the Insurance Tribunal within thirty days.

The IRA has fined insurers for failure to honour claims. It has not published any directive requiring insurers to provide prospective policyholders with a written illustration of what they would recover if they lapsed before the twenty-fifth month.

That omission is the central regulatory scandal in this story. The IRA mandates disclosure of the maturity benefit. It does not mandate disclosure of the lapse scenario, which is statistically far more likely for a significant proportion of the policyholders being sold these products.

Kenya’s financial consumer protection architecture makes it compulsory to tell a buyer what they will receive if everything goes right. It does not compel the seller to explain what happens when something goes wrong, which in an economy with this level of income volatility, is the scenario that matters most.

Industry voices have for years argued that the IRA should require life insurers to separate the insurance and investment components of endowment products in their disclosures, and that the Capital Markets Authority should assert regulatory jurisdiction over any product sold as an investment.

The proposal has not advanced. The status quo, in which an insurer can market a product as investment-grade to buyers who do not understand that it is an insurance policy governed by insurance law, with insurance surrender terms, and insurance commission structures, continues undisturbed.

“IRA should insist that insurance sells only protection and CMA should insist that any insurance company selling investments brings it under the CMA umbrella. Insurance companies should disclose how much income is coming from forfeited premiums.”

WHAT SMART PARENTS SHOULD DO INSTEAD

The case for education insurance is not wholly without merit in a narrow sense. The death benefit and premium waiver provision is a genuine protection.

If a policyholder dies and the insurer waives remaining premiums while paying out the maturity benefit, a child’s education is secured regardless of the parent’s absence.

Term life insurance provides this protection at a fraction of the cost, without locking the savings component into an illiquid, penalty-laden vehicle.

The rational financial structure for a Kenyan parent planning for a child’s education is to separate the functions.

Buy term life insurance, which is cheap, offers high cover, and can be cancelled without penalty. Then invest the remainder in instruments that are liquid, transparent, and governed by the Capital Markets Authority.

Money market funds averaging nine to eleven per cent in effective annual returns are accessible from as little as Sh1,000 via platforms including Britam’s own asset management division, Sanlam, ICEA Lion, CIC, and the Co-operative Bank unit trust platform.

Government treasury bonds, particularly infrastructure bonds with tax-exempt coupons, provide long-term, inflation-beating returns with capital guaranteed by the state and no surrender clause in existence anywhere in the term.

The insurer does not want you to know this.

The agent does not want you to know this. The product literature is written so that you do not compare. Every page of the Boresha Elimu or Career Life Plus marketing is designed to make you feel that refusing the product is a failure of parental responsibility, rather than the financially literate decision it actually is.

THE BOTTOM LINE

Education insurance policies are not illegal. They are, in the strict technical sense, authorised, supervised, and compliant financial instruments. That is precisely the problem.

The regulatory framework has been designed to make them legal, not to make them fair. It mandates disclosure of what the product delivers when held to maturity. It does not mandate disclosure of what the product costs when life intervenes, as life, in Kenya, has an unfortunate habit of doing.

The woman in the viral video lost Sh540,000. The investor who spent three years paying Sh30,000 a month to Britam lost Sh900,000.

Across the nation, thousands of policyholders who trusted an agent, believed the brochure, and signed a commitment they could not ultimately sustain have lost money that, deployed differently, would have grown, remained accessible, and survived the income shocks that education endowment policies are specifically designed not to cover.

Their losses are not bad luck. They are the intended operating mechanism of the product.

Until the IRA requires that every education endowment policy be sold alongside a written, quantified illustration of the lapse scenario; until the CMA asserts jurisdiction over any product sold as an investment regardless of the insurer’s regulatory domicile; and until insurers are required to publish the annual income they derive from forfeited premiums, this industry will continue to do exactly what it is currently doing: extracting wealth from Kenyan families in the name of their children’s futures, with the full blessing of the law.

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Complaints against insurance companies can be directed to the Insurance Regulatory Authority consumer disputes desk. The IRA toll-free complaints line is 0800 723 225.

For policyholders who have already passed the twenty-fifth month threshold, a surrender value is available from the insurer, though it will be substantially below total premiums paid. Those who believe they were not adequately informed of lapse terms at point of sale may file a formal written complaint with Britam’s customer service and, if unsatisfied, escalate to the IRA.