By Washington Ndegea
A lot has been done for the insurance industry in advancing its growth, but it seems that a lot still needs to be achieved. Kenya’s insurance growth quotient is at a penetration rate – the total value of insurance premiums as a proportion of Gross Domestic Product (GDP) – of about 3 per cent. This doesn’t compare with a country like South Africa at 13 per cent, thus showing that we are still far behind one of the countries with the highest penetration rates in the world.
A look at figures from Insurance Regulatory Authority (IRA) for the period January to December 2016 shows an improvement in growth figures with an improvement from 2015 of 9.9 per cent to 12.3 per cent in 2016. The figures do not mean a higher penetration of insurance in the economy since the economy is still growing at the same or higher rate.
One of the main reasons insurance is not growing is the cost of insurance. The premiums are not affordable to the majority of the population hence presenting a challenge to the industry to lower the premiums. The insuring public is quite ignorant on the value of insurance to their lives, and you find they would rather do fundraisers for eventualities than buy insurance to mitigate a loss.
Fraud in the sector has made the industry very unattractive to would-be entrants in the field. As a result, people who would have brought extra knowledge and expertise in the field are shut off, designating it to its doom. It also has a way of rising insurance premiums by up to 20 per cent.
Trust in the industry is at its lowest since insurance started in Kenya in the early 20th Century. Claims are not being paid on time, service providers are not getting their invoices honoured, and agents are not receiving their commissions. This cannot auger well for an industry that “eats” reputation for it to survive.
Weak regulation of the industry has seen bankrupt companies continue to operate despite measures taken to improve the sector. It seems that the measures taken are just meant to be seen and appreciated but not to be implemented. We have companies that still operate and collect premiums yet they have broken all the rules of insurance – they don’t honour claims, they don’t pay service providers, they don’t pay agents commissions and they don’t submit quarterly returns to the regulator, prompting everyone to ask whether there is a Commissioner of Insurance in this country. The Amended Insurance Act 2015 states that companies who don’t submit quarterly reports to the Commissioner will not be licensed and therefore will not open their doors to the public. What’s the way forward in this?
There’s a pending Micro Insurance Bill of 2014 that is meant to solve the problem of high premiums by making possible the establishment of lower premiums products fit for low income households. Their creation aims to lower the cost of selling micro insurance products and increase the accessibility and customer value of insurance in the Kenyan market. This Bill needs to be passed as soon as is possible.
IRA has embarked on a campaign of educating the public on the value of insurance through the media and holding workshops all over the country. They have introduced an easy certificate in insurance called Executive Certificate of Proficiency (ECOP) that has now become the minimum entry-level requirement for those willing to join insurance as professionals. While it has its flaws, it is an attempt in the right direction. We remain to see how effective this approach will be, seeing that it’s not including all the stakeholders in the industry like insurance agents.
Bima Intermediaries Association of Kenya (BIAK) is an insurance agents association mandated to look after the welfare of the agent among other duties. With the coming of the association, we have been looking at the quality of agents in the industry and especially new entrants in the industry noting that that there are very many conmen in the industry masquerading as insurance agents. We are working hand in hand with willing insurance companies in getting them professional agents, and also helping weed out the rotten apples. This we know will go a long way in streamlining the industry and achieving a double-digit growth.
Fraud can be contained by insurance companies sharing data on fraudulent activities with the companies, and also involving BIAK especially where insurance agents are concerned. It should be noted that no fraudulent activity happens in isolation, and that the cons take advantage of the lack of cohesion in the industry to do their stuff. The recent case of hospitals and doctors perpetrating fraud is a case in point. This can be solved too by embracing technology to improve on monitoring.
The insurance industry needs to earn back the trust it had (if they ever had any) or create trust with everyone they deal with, including the intermediaries and members of the public, if at all we are going to enhance growth of the insurance industry. This can be done by companies honouring their obligations to everyone and going a step further by doing a lot of ex-gratia payments. Kindness has never killed anyone.
Finally the regulator needs to wake up and show the industry that he is in charge. The growth of insurance goes hand in hand with the growth of the economy. Economic growth cannot be achieved with a weak insurance landscape. Otherwise the cost of sustaining the economy will be too high.
Writer is Chair, Bima Intermediaries
Association of Kenya (BIAK)