The Role of Digital Technology and Artificial intelligence, in Transforming Health Insurance in Kenya

Health insurance plays a critical role in promoting universal health coverage (UHC), ensuring that individuals and households are protected from catastrophic healthcare costs.

In Kenya, health insurance penetration remains low, with only about 19% of the population covered, primarily through Social Health Authority (SHA), previously the National Health Insurance Fund (NHIF), and a few private schemes. SHA accounts for approximately 88% of insured individuals, while private health insurance covers only around 4%. More broadly, overall insurance penetration (all types) stood at just 2.3% in 2023, according to data from the Insurance Regulatory Authority (IRA) and KNBS, well below the global average of 7%. More recent estimates put the figure at around 2.4% in early 2024, underscoring the persistently low uptake of insurance in the country. The gaps in access, affordability and efficiency have created widespread inequities in healthcare financing.

Over the past decade, Kenya’s insurance sector has begun to integrate digital technology and artificial intelligence (AI) as tools for addressing these challenges. With Kenya already recognised as a leader in mobile money innovation through M-Pesa, and with the rapid rise of insurtech solutions, the foundations are in place for a digital transformation. These innovations are not only streamlining claims processing and fraud detection but also opening new avenues for affordability and inclusion of underserved populations.

In this legal alert, we analyse how digital technology and AI are transforming Kenya’s health insurance sector, highlighting opportunities, risks and implications for regulation and governance.

Expanding Access and Inclusion

One of the greatest barriers to health insurance uptake in Kenya has been affordability and accessibility. Traditional insurance products often target the formal sector, leaving out informal workers, rural communities, and low-income households. Digital technology is bridging this gap in several ways. 

Firstly, mobile-based microinsurance platforms, often linked with mobile money services, have enabled Kenyans to purchase health insurance in small, flexible payments. For instance, in partnership with various underwriters, platforms such as M-KOPA, mTeck and newer insurtech solutions have allowed daily or weekly premium contributions, which align with the income patterns of informal workers. This shift from lump-sum annual premiums to micro-premiums lowers the barrier to entry.

Secondly, AI is further personalising these offerings by analysing consumer data, such as income flows, mobile transaction history, and health-seeking behaviour to design tailored products. This enables insurers to move away from a “one-size-fits-all” approach and instead deliver coverage that fits specific risk profiles and financial realities.

Such innovations align with Kenya’s Universal Health Coverage (UHC) agenda under the national government’s health financing strategy. By making insurance accessible to marginalised populations, digital and AI-driven solutions can close the equity gap in healthcare access.

Enhancing Efficiency and Reducing Costs

The administrative inefficiencies of Kenya’s insurance sector, including long claims processing times and cumbersome paperwork, have historically discouraged both providers and consumers. Digitisation is significantly improving efficiency across the value chain.

Firstly, digital claims platforms allow hospitals and insurers to exchange data in real time, eliminating delays caused by manual verification, subject to data protection laws. This shortens reimbursement times for providers and makes healthcare more attractive for insured patients. For insurers, it reduces administrative overheads and increases transparency.

Secondly, AI-powered chatbots and digital customer service systems are increasingly being used by insurers in Kenya to provide 24/7 support. These systems reduce operational costs while improving customer satisfaction, as clients can access information instantly rather than waiting in long queues at physical offices.

Thirdly, predictive analytics powered by AI helps insurers anticipate future claims patterns, improve pricing models, and optimise risk pools. By predicting high-cost cases and healthcare utilisation trends, insurers can better plan their reserves and ensure sustainability. This not only reduces costs but also strengthens the financial stability of the insurance system.

Combating Fraud and Leakages

Fraud remains a significant challenge in Kenya’s health insurance sector. Cases of inflated hospital bills, fictitious claims and collusion between patients and providers are common, undermining trust in the system. 

AI is playing a vital role in combating fraud. Machine learning algorithms can scan large volumes of claims data to detect unusual patterns, such as repeated claims from the same provider, irregular billing codes, or suspiciously high-cost procedures. By flagging these anomalies early, insurers can intervene before fraudulent claims are paid out.

For example, digital fraud detection systems deployed by private insurers in Kenya have led to significant cost savings by identifying duplicate or exaggerated claims. As these tools mature, they will reduce the leakage of funds, improve accountability, and enhance the sustainability of health insurance.

The broader implication is increased confidence among both insurers and consumers. When fraud is minimised, insurers can afford to lower premiums, making products more accessible. At the same time, consumers feel more secure knowing that the system is transparent and fair.

Opportunities for Integration with National Health Insurance

The Social Health Authority (SHA), under the Social Health Insurance Act, faces the dual challenge of expanding coverage to all Kenyans while ensuring efficiency and accountability. Digital technologies and AI offer important solutions here.

Digitisation of SHA systems has already begun, with e-claims platforms linking hospitals directly to the fund. However, the integration of AI-driven analytics could take this further by enabling smarter allocation of resources, real-time monitoring of utilisation, and identification of fraud at scale.

Moreover, interoperability with private insurers through digital platforms could create a more harmonised ecosystem, where Kenyans can seamlessly access both public and private health financing options. For instance, a citizen could use SHA coverage for basic services while topping up with a private microinsurance product, all managed digitally through a unified platform. This integration would strengthen Kenya’s progress toward UHC, reducing duplication, improving resource use, and fostering trust in the system.

Regulatory and Governance Considerations

While digital technology and AI offer immense opportunities, they also present governance challenges that Kenya must address.

First, data protection and privacy are critical. Health insurance relies heavily on sensitive personal and medical data. With Kenya’s Data Protection Act, 2019 in force, regulators must ensure that insurers and insurtech platforms comply with strict standards for data storage, processing, and consent.

Second, the Insurance Regulatory Authority (IRA) must adapt its frameworks to account for digital-first business models. Issues such as algorithmic transparency, fairness in AI-driven pricing and accountability for automated decision-making require regulatory clarity. Without oversight, there is a risk of reinforcing inequities, for example, if algorithms price out high-risk populations such as the elderly or chronically ill.

Third, regulators must balance innovation with consumer protection. Sandboxing approaches, such as Bima Lab established by the IRA, where insurtech firms can test innovations under supervision, may help Kenya harness the benefits of digital transformation while mitigating risks.

Finally, international collaboration through bodies such as the International Association of Insurance Supervisors (IAIS) can provide Kenya with global best practices in regulating AI and digital health insurance. Aligning with such standards will enhance investor confidence and protect Kenyan consumers.

Challenges and Risks

One of the most pressing challenges in Kenya’s transition to digital health financing lies in the persistent access gaps. Unequal access to smartphones, reliable internet and digital literacy, especially in rural and low-income communities, risks excluding the very populations that universal coverage is intended to protect. 

At the same time, trust and credibility remain fragile. Historical delays in claims processing, coupled with limited transparency, have left many Kenyans skeptical of insurance products. For any digital transformation to succeed, it must therefore embed openness, accountability and consumer education at its core to restore public confidence.

The financial burden of implementation also poses a significant obstacle. While digital platforms and AI promise long-term efficiency and cost reduction, the upfront investments in infrastructure, workforce training and deployment remain prohibitive, particularly for smaller market players. 

Beyond cost, there are also profound governance and ethical risks. The use of algorithms in decision-making introduces the possibility of bias, unfair outcomes and unintended discrimination. Addressing these risks demands strong oversight frameworks designed to uphold fairness, accountability and ethical compliance, ensuring that innovation does not undermine equity.

Conclusion

The integration of digital technology and artificial intelligence is fundamentally reshaping Kenya’s health insurance landscape. By enhancing access, efficiency, fraud prevention and affordability, these tools are making health coverage more inclusive and sustainable. At the same time, they align closely with Kenya’s pursuit of Universal Health Coverage and broader healthcare reforms.

However, realising the full potential of digital and AI transformation requires deliberate action. Policymakers must strengthen regulatory frameworks, insurers must invest in infrastructure and consumer education and innovators must prioritise ethical and inclusive design.

If these challenges are addressed, Kenya can position itself as a continental leader in digital health insurance, much like it did with mobile money. The convergence of technology, policy and innovation could turn health insurance from a privilege of the few into a foundation of social protection for all Kenyans.