Microinsurance ‘evangelism’ remains a hard sell in Kenya

By Steve UMIDHA

Micro – insurance ‘evangelism’ remains a hard sell among Kenya’s poor households despite the increasing number and types of micro insurance products in the local market, a new study shows.

Unlike micro lending – the better-known side of micro finance with a total asset base of more than 250 Billion as of December 2021 according to credit rating firm Agusto and Co, micro insurance has been slow to take off despite growing ecstasy among implementers.

An analysis by the Association of Kenya Insurers (AKI) dubbed the state of Microinsurance in Kenya cites various reasons including price undercutting by insurance firms, low profitability, fraud and sales agents prioritizing on products that have higher premiums among others.

Other reasons cited by the association are that intermediaries are not having a good grasp of the products and claim procedures as well as high starting capital asked by the regulators.

““For microinsurance to work, we need to partner with a wider variety of institutions including development partners, insuretechs and technology partners, the Government and other business associations and aggregator groups such as SACCOs, Churches and others.

I am glad to note that the Microinsurance regulations allow for insurance distributors to be non-insurance players,” noted the Chief executive of AKI, Tom Gichuhi.

For starters, microinsurance provides access to the formal insurance market by creating unique products and distribution systems to address their needs and covers smaller coverage and relatively or proportionally attract smaller benefits.

The AKI survey, released this month was carried out earlier this year and found that the number of micro insurance products in the market had shot to more than 55 compared to 32 in 2015 – even though a number of brokers had lessened over time.

The latest figures by the Insurance Regulatory Authority (IRA) show that the number of registered insurance brokers had dropped from 225 by end of last year to just 204 as of June 30.

The regulator had in July last year delisted some 38 insurance brokerage firms for non-compliance including failure to remit premiums on time.

Indeed, health insurance, personal accident, and last expense were noted in the AKI report to be the most popular microinsurance products demanded by consumers and that have the potential to grow and cover a wider section of the population – but that is yet to be felt across the insurance segment.

These products include crop insurance and livestock or cattle insurance, which are increasingly sold as index-based insurance, covering theft or fire, death insurance, disability, and natural disasters.

Those targeted by micro insurance include the Jua Kali sector, farmers, farm workers and house helps among others.

It followed the 2020 issuance of microinsurance regulations by IRA, requiring microinsurance underwriters to register a separate business away from conventional insurance.

The regulations also clearly define the parameters of a micro insurance product to be not longer than twelve months (renewable), premium should not exceed Sh40 per day and the sum assured should not exceed Sh 500,000.

According to AKI, there are key barriers that limit the growth of the microinsurance industry whose report found that “some aspects of the regulations are not well comprehended… Existing underwriters prefer to implement the microinsurance within the preexisting conventional insurance business license.”

Further, AKI notes that “It is perceived that the insurance companies should be allowed to innovate products without having to obtain new approvals from the IRA.”

“It is perceived that clients should be notified and no further need to get approval by the IRA – driven by particular needs in the current situation so as not to limit innovation. Perhaps have flexible (bracket features) that allow innovation whilst protecting policy holders,” reads the report in part.

This article first appeared on People Daily