Corruption, mistrust slows insurance growth

By GEOFFREY NJENGA

KENYA: The gurus in insurance business define insurance as a risk transfer mechanism. This means that on payment of some little money (premium), the insurance company promises to pay your claim should the loss actually occur. The expectation is that the insurance company would respond quickly and efficiently with the payment so as to alleviate your pain and inconvenience.

Insurance came to the East African region at the turn of the last century mainly to offer protection for European property owners. The business right from the beginning focused on the elite. The elitist tag dogs the industry even today.

The government of Kenya entered the fray in 1973 through the Kenya National Assurance (KNA) as a state insurer. The industry would thereafter grow even faster after the enactment of the Insurance Act in 1984.

Today, the industry boasts of about 50 insurers and reinsurers, with estimated turnover worth of nearly Sh110 billion and net profitability reported at about Sh15 billion. Kenya leads the rest of East Africa in insurance business.

In spite of the rapid growth, the insurance industry has been faced with some severe challenges over the years, including unacceptable rate of failure. The 1990s and 2000s were indeed the decades of collapse of underwriters; beginning unbelievably from the collapse of the state-owned KNA to about 10 more, with the rate of almost one company every year. The latest casualty was Concord Insurance company which failed last year.

Consequently, the public holds Insurance with suspicion and many would rather not come nearer. The numbers bear the fact. I am yet to meet someone who enjoys close encounter with insurance. Some wag has likened insurance to death. We deal with death only when we have to, then dash out!

Does insurance actually work? Many will say no. Many survivors will tell personal tales of woe after their encounter with “these insurance people”. After the terror in the night with the thugs, then the police; you are least prepared for the legendary fuss in the claims department, filling forms couched in strange language. The loss assessor might demand ‘something’ to spray your entire car. The doctor too might want to quarantine you in the North Wing at the Nairobi Hospital for what is in reality a bout of common cold.

You come out angry and frustrated and hopping mad and generally feeling like a survivor in a bombing zone. But you ain’t seen nothing yet! You will soon learn that the particular risk that took you there in the first place is not covered by your policy! You now want to die!

It is little wonder therefore that 97 per cent of Kenyans are not persuaded by the glamour of the PR blitz by insurance industry. Someone says that only about 3 per cent of Kenyans claim to have any form of insurance. This translates to just about 1.2 in a population of 40 million. My hunch is that this figure is overstated. In any case, most of those in this percentage are reluctant convertees, if you consider that motor insurance and loans and mortgage protections are all compulsory. The percentage of those who voluntarily seek insurance protection could easily shrink below 1 per cent of the population!

By the way, did you know that Safaricom alone is larger than the entire insurance industry in Kenya?

Some wag has called insurance the sick sister of the financial sector. The reasons are many and varied ranging from dismal claims settlement record and obvious double-speak between underwriting and claims to brazen thieving cartels that at times involve owners and managers, and little interest in creativity. All these factors and more conspire to keep the sister very sick. This is not to say that someone out there is not trying very hard to do a good job.

How do you dig into the massive untapped potential? Deal with the thieving troop. Link the big talk on customer service to real action. Forget good intentions! The road to hell is said to be paved with good intentions. Have a firm grip on technology as the driver of future trends. Pay claims and forget PR gimmicks. Make the language of those documents understandable by normal human beings. Very few of us ever wanted to be lawyers anyway! Embrace corporate governance. The industry craves leadership with integrity.

There is work to do. Of course the players in the industry can choose to ignore all this or they can roll their sleeves and get down to serious work. The choice is theirs.

How about the future? Green as the tea zones of Kericho! Kenyan insurance landscape is virtually virgin land for the discerning investor. Are there any takers out there?

The writer is the immediate former MD|CEO of Invesco Assurance Company which he revived in 2010, and the Regional Director of Negotiation and Conflict Management Group International.