Poor understanding of insurance dragging back sector

Customer experience is shaping the growth of the insurance sector. [Stockphoto]

Insurance is a vital tool that not only plays a major role in protecting businesses, homes, lives, health and assets against risks, but also provides peace of mind knowing that in case of any disaster, accident or even sickness, you are financially covered. Uptake of insurance products like health, motor vehicle, life, travel and property insurance among others, have for a long period remained relatively low in Kenya, especially among the medium to low-income earners.

According to the 2020 Financial Stability report by the Central Bank of Kenya (CBK), insurance penetration in Kenya stands at 2.4 per cent below the global average of 7.2 per cent. The low penetration level according to the Association of Kenya Insurers is majorly attributed to a lack of knowledge or poor understanding of insurance and perception of the high cost of insurance.

A report by KPMG South Africa indicates that Kenya has the third-lowest insurance penetration rate in sub-Saharan Africa standing at three per cent with South Africa being the largest at 17 per cent, accounting for 70 per cent of total premiums in the continent. Countries like Morocco, Egypt, and Nigeria closely follow suit recording penetration rates of over 3 per cent. In other African markets, the penetration rate remains below 2 per cent.

Despite this dip in insurance uptake, the sector has been active in coming up with ways of encouraging insurance uptake especially given recent disruptive events including natural disasters, political upheavals, effects of coronavirus and economic disruptions. Transformative trends such as automation of processes, data analytics to detect and prevent fraud and leveraging of opportunities to create and sustain consumers’ trust are revolutionising the sector.

Many ask why the insurance sector is critical. Boosting insurance penetration levels for any given country is instrumental in improving financial stability for businesses and households, mobilising savings for public and private investment, reducing pressure on the government to provide public goods such as pensions, encouraging trade and entrepreneurship, mitigating risks, enhancing diversification and improving social living standards. However, the ultimate success of these trends is not only dependent on industry players but customer participation as well.

Customer experience is shaping the growth of the insurance sector and many insurers are restructuring their business models to put their customers at the centre. As a result, micro insurances are coming up to reach out to the medium to low-income earners through small-scale, tailor-made, low-cost, low-risk products.

For example, recently the Insurance Regulatory Authority developed a Micro Insurance Policy to scale up insurance coverage to over 38 million Kenyans who are not covered while boosting the uptake of insurance across the country.

- Mr Kisevu is the Head of Sales and Business Development, Kenya Orient Insurance Limited