Friday, April 29, 2016
In global terms, African citizens remain the most vulnerable people with the least access to insurance. To change this situation in its country, the government of Kenya is aiming at a more inclusive and competitive financial services sector, in which microinsurance is to play a key role, by 2030. Ideas that challenge conventional insurance approaches seem to be the road to growth. The question of how these ideas can result in viable business models was discussed during the 2016 Microinsurance Learning Sessions in Kenya, held earlier this month.
Focus on customer value and sustainability
The conference took place at the right time in the region in which the market is expanding. Significant milestones have been achieved. However, half of the products that were introduced in the past were withdrawn within one to two years, according to the Commissioner of Insurance. The main reason for this is that apparently the products were not sustainable.
According to research from the Financial Sector Deepening Kenya (FSDK), 40% of Kenyans do not buy insurance because they do not understand it. The main difference between insurance and most of the other products is that insurance is not tangible. When people receive a microloan, they walk home with money in their pockets. However, when buying insurance, the clients must pay money but only receive a piece of paper and a promise. Trust, easy claims processes and value for the client are key success factors to long-term success and clients renewing their policies.
Drivers for market development
Despite the growing importance of technology in particular and of distribution through mobile network operators (MNOs), the majority of the participants agreed that insurers will remain more important as drivers of market development than the distribution channels. A strong majority at the event was of the opinion that MNOs will still not be the main distributors for insurance in Kenya in five years. Representatives from the insurance industry raised concerns about a possible attempt by the MNOs to monopolise distribution channels. In terms of customer value, the participants agreed that the insurers and distribution channels play an equally important role in ensuring value for the client as regulators or donor organisations.
The way forward
The majority of the speakers and participants were of the opinion that microinsurance is likely to grow rapidly in the next five years.
The above is extracted from the conference report. The full report can be read here.
Written by Dirk Reinhard, Vice Chairman, Munich Re Foundation, Germany and Lemmy Manje, Consultant, Zambia
About the event:
The Microinsurance Learning Sessions Zambia took place in Diani/Mombasa from 6 to 7 April 2016. Some 80 insurance experts – mainly from Africa – attended the event under the key topic of “Microinsurance business models for Africa”.
The Microinsurance Learning Sessions were hosted by Munich Re Foundation and the ILO’s Impact Insurance Facility in collaboration with AB Consultants, with support from the Microinsurance Network, the Insurance Regulatory Authority of Kenya (IRA), Association of Kenya Insurers (AKI), the Centre for Financial Regulation and Inclusion (Cenfri) and Africa Re.