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Pay up or close shop, treasury warning shot to insurance firms

At 3%, Kenya has the third lowest insurance penetration rate in Sub-Saharan Africa with South Africa leading at 17%. This is due to most of Kenya’s population perceiving insurance as a “nice-to-have/easy to discard” product rather than one that is essential.

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By Phyllis MUCHOKI

The Treasury Cabinet Secretary Njuguna Ndung’u has warned insurers to pay up on delayed claims or close shop.

In a speech read on his behalf by Principal Administrative Secretary Treasury Samson Wangusi at the ongoing 8th Eastern and Southern Africa Regional conference on inclusive insurance, Ndung’u said Insurers who consistently fail to meet the set standards for good business practice should perhaps close shop.

He said the unfortunate reputation tag of delayed or non-payment of claims often overshadows the insurance companies that have a good reputation of timely payment of claims.

“I would like to reiterate that insurance companies are in the business of mitigating risks by paying claims. This has to be done in a timely manner! By doing this, the companies cultivate stronger relationships with their customers and thereby securing a license to operate.

Noting that such acts led to their sustained growth while creating a financial and societal value at the same time. Doing business means adding value but what kind of value and for whom exactly.

“Businesses are under pressure to compete in the marketplace, striving to identify market opportunities and develop solid business ideas.

Stakeholder management therefore has to be part of good corporate governance company’s genuine commitment is demonstrated not only by proactively seeking out appropriate partners for engagement, but also by making sincere attempts to understand those stakeholders and implement their concerns into corporate decision-making,” said Treasury CS.

Micro-insurance craze fails to excite market

Meanwhile, insurance companies are still struggling to resourcefully market micro insurance products, and experts now concede that the once hyped concept has so far failed to excite the market.

Until recently, most insurers both locally and across several African markets, have heavily relied on face-to-face distribution and continue to rely on legacy systems that do not accommodate the changing needs of consumers.

Experts now say that needs to change if players in the industry are to reap from the sub-segment of the insurance market, they admit hasn’t been fully tapped.

“Technology will be a key driver of micro insurance in Africa as insurers close the protection gap in driving the inclusive insurance agenda,” urged Godfrey Kiptum the Insurance Regulatory Authority (IRA) Commissioner of Insurance at opening of the Eastern and Southern Africa Regional Conference on Inclusive Insurance, with calls to adopt innovative business models “that will curb the damages that hinder access to insurance.”

Microinsurance products offer coverage to low-income households or individuals with little savings, and are often tailored specifically for compensation for illness, injury, or death, and lower valued possessions or assets.

But the concept is yet to be grasped by its target market owing to a number of reasons including the high cost of selling such products to individuals compared to group covers which are most preferred by the insurance firms.

Several insurance firms like CIC insurance have since abandoned products like Afya Bora due to the loss-making nature of the business with as many firms suffering similar fate.

In a world where consumers are clued up on technology and prefer to have their world revolve around their smartphones, insurers are now being advised to digitize customer engagement through software applications if they are to also boost the general insurance penetration.

At 3 percent, Kenya for instance has the third lowest insurance penetration rate in Sub-Saharan Africa with South Africa leading at 17 percent. This is due to most of Kenya’s population perceiving insurance as a “nice-to-have, easy to discard” product rather than one that is essential.

CIC LIFE Assurance Managing Director, Mechack Miyogo says the region is ripe for microinsurance driven by partnerships, technology and customer focus approaches.

Apollo Group Chief Executive Officer Ashok Shah said there is huge potential in inclusive insurance to drive the premium uptake in the region, citing cost as a key factor inhibiting insurance growth.

The IRA 2021 Annual report indicates that Africa reported premiums of USD 74.2 billion accounting for 1.1 percent of the world insurance premiums. This was an increase of 6.2% in premium compared to a decline of 1.9 percent in 2020.

Africa’s long-term insurance premium grew by 7.1 percent in real terms to USD 51.32 billion (2020: USD 41.83 billion) whereas, the general insurance premium recorded a growth of 4.4 percent to USD 22.88 billion (2020: USD 20.05 billion) due to economic rebound from pandemic-induced recession in 2020.

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