Insights

Why We Don’t Like Insurance

Insights

Insurance in Kenya tends to be perceived as more of an obligation rather than something beneficial to sign up for. According to a report by the Association of Kenya Insurers, the penetration of insurance in Kenya is low, approximated at 2.6%. Life insurance is at about 1.05% and non-life at 1.55% [1].

If it were not for statutory requirements, such as motor insurance, it seems insurance uptake would have been a fraction of the current stats. Though a small percentage, this accounts for approximately KES 209 billion in premiums in 2017 [3]. What exactly causes the low uptake of insurance in the country? Let’s have a look at some reasons:

Negative perception: yes, you know that look you give insurance agents when they walk into your office. Unfortunately, insurance has been marred by fraud and difficulties in processing claims give it this perception. Of all the challenges mentioned in a 2013 report, fraud accounted for 7% and claims settlement challenges at 9% [5]. This is not to mention the overly complicated language in the policy that gives the perception that there’s a lot of information hidden in the fine print [3]. Further, a life insurance policy reminds people of their own mortality and is a culturally avoided topic.

Lack of money: It is hard to spend money on a “what-if” scenario especially with scarce resources. A high number of people in Kenya simply do not have the disposable income required to get a policy. This low purchasing power has been cited as one of the challenges in the insurance industry contributing to low penetration [5].

Other challenges are industry related such as price undercutting and inadequacies in distribution channels. The latter has been resolved through partnerships with banks through bancassurance arms such as MyFriend Insurance Agency of Credit Bank.

Away with the Challenges; Discover the Benefits

While it may have a bad rep, insurance is here to stay. Why? Because it simply makes sense. Risks are part of life and it is a smart move to mitigate against them. Below are some of the ways an insurance policy can help you.

Social Benefits

Life happens, it is bound to. While you may shy away from the topic, some insurance policies give you social benefits including social security. A life insurance policy takes care of your dependents financially should anything happen to you. The right policy can cover your pending financial obligations in the event of a fatality or even career threatening accident. What of your children? With an education policy, your children are ensured a future as the policy ensures school fees is catered for.

Research done by AKI showed that funeral expenses cost between Sh50,000 and Sh300,000 due to commercialization [2]. Previously, people looked to harambees or social capital in order to raise money. However, it is becoming increasingly difficult to fundraise for funerals. As a result, having a funeral insurance policy can ease the pressure of your loved ones and eliminates the need to fundraise.

Financial Benefits

Some of our insurance policies are geared towards savings and investments. The investment policy, for example, has various financial benefits. One of its main benefits is guaranteed payouts during the policy’s term e.g. every five years. Inasmuch as you are saving, you get a guaranteed return at the end of the designated periods.

When you live past the maturity date of your life insurance policy, your provider gives back the lumpsum savings in addition to your bonus payouts and sum assured.  Another great advantage is the tax benefits. The best part about this is that KRA will give you a tax relief of 15% on your premiums.

Continuity

Under social benefits above, it is clear the continuity benefits accrued to your beneficiaries. This means that they can continue with life with minimal disruption.

What about businesses? An insurance policy ensures that your business carries on no matter what happens. To illustrate this, let’s say that you are a business-person who depends on high-cost machinery to maintain your operations. If this machine suffers a risk covered say theft or fire, you would have to incur a huge cost in order to replace it. This cost might affect salaries or take months to recover. An insurance covering such a risk would ensure you are restored to the status quo covering any losses that incurred during that period. You can thus rest easy knowing your business is in good cover.

Secondly, you can invest more because you know you are insured. Having insurance frees your mind to think of greater business opportunities, knowing that your current assets are not at risk. It also delegates the huge task of calculating risk to insurance companies that specialize in that area. In the grand scheme of things, insurance empowers you to do more and thus contributes to greater social capital.

The Take-Away

Sold on the idea? If so, have a look at Credit Bank’s insurance packages, which are designed to give you the best value for your money. We offer a wide range of services including; motor insurance, property insurance, debit card insurance and more. Moreover, we have a dedicated relationship management team that’s open and available to answer your questions and concerns. Get in touch today.

Bibliography

[1] Association of Kenya Insurers, “AKI Insurers Industry Annual Report 2017,”.[Online]. Available: https://www.akinsure.com/images/publications/AKI-Insurance-Industry-Annual-Report-2017—Final-Report-30.08.18.pdf. [Accessed 25 April 2019].
[2] D. Wainaina, “Only 25pc of Kenya adults insured, new survey shows,” Business Daily, 8 April 2018. [Online]. Available: https://www.businessdailyafrica.com/markets/marketnews/Only-25pc-of-Kenya-adults-insured–new-survey-shows/3815534-4377780-11pr4ez/index.html.
[3] Insurance Regulatory Authority, “Annual Insurance Statistics,” 2017. [Online]. Available: https://www.ira.go.ke/index.php/publications/statistical-reports/annual-reports?id=266. [Accessed 25 April 2019].
[4] A. Morris, 8 September 2012. [Online]. Available: https://www.standardmedia.co.ke/article/2000065705/n-a.
[5] Insurance Reulatory Authority, “2013 Kenya Insurance Outlook,” 2013. [Online]. Available: https://www.ira.go.ke/index.php/publications/research-surveys?download=129:2013-kenya-insurance-industry-outlook.[Accessed 25 April 2019].
[6] B. Gitau, “43 reasons for low insurance penetration,” University of Nairobi, [Online]. Available: https://www.coursehero.com/file/p4fnqff/43-Reasons-for-Low-Insurance-Penetration-and-Challenges-faced-by-Insurers-in/.
[7] M. Omusolo, “The Association of Kenya Insurers promote uptake of funeral cover,” The Standard, 6 October 2018. [Online]. Available: https://www.standardmedia.co.ke/article/2001298011/the-association-of-kenya-insurers-promote-uptake-of-funeral-cover.