Why insurance take up is still low in Kenya

 

The penetration of general insurance is 1.9 per cent, while that of life is 0.94 per cent of GDP. This is too small.Photo/FILE 

By SIDDHARTH IYER

Among the most talked about topics in the insurance industry is the low penetration and spread of the business.
Lack of trust in the industry, limited knowledge on its products, its limited reach to the informal sector; the perception that insurance is expensive, and the fear of not being able to service it continuously, are some of the factors hindering penetration of the service.

Insufficient tax breaks offered to individuals and corporates, lack of tax incentives to life insurers and the absence of active government involvement in mitigating calamities, also play a part in reducing its spread.

Yet tomorrow is a mystery. No one knows what will happen or how it will affect us. We spend on vehicles, dresses, mobiles and on our dead. On weekends, we blow money on beer or night clubs, while thinking for most of the time about how to make money.

Do we ever think about what would happen to our dear ones if we are no more, or about our future if we fall sick among other things? Most likely not, yet the answer to that would be scary for some.

Besides individuals, the government invests in infrastructure, mass housing, public hospitals, education, armed forces and employment among other things.

Where does this money come from? Is private capital ready to invest in such long gestation projects where long term funding is required?

How can it raise such funds without going for international aid or multilateral funding at times not favourable to the country or its masses? How can it stimulate saving, grow demand, develop domestic industries and deepen the market?

The three pillars of business — man, material and money — all are strengthened and reinforced by insurance. So why is it that when the individual, the society, the government and industry all have a desperate need of insurance, it forms such a small part of the economy?

The penetration of general insurance is 1.9 per cent, while that of life is 0.94 per cent of GDP. This is too small. The foundation of growth lies in the saving and spending by the common man.

This money comes from the taxes you and I pay, directly or indirectly, from the savings in banks, pension funds, life insurance and gratuity among others.

The government needs to stimulate savings by offering more tax breaks on insurance premiums paid by individuals and corporates; and give tax incentives to life companies.

A strong family tree, focus on education, a keen desire to acquire wealth, membership in saccos and human capital, are favourable factors for insurance penetration.

Strong sales-cum-distribution networks combined with simple, pre-underwritten, inexpensive, packaged products with simple and affordable premium payment channels to address the need of the masses, are the key for life insurance to succeed.

We have developed products like ‘Bima Yangu’ for mass consumption and ‘Mavuli’, a premier product caters for the needs of different segments in the society.

Geminia has a 28-year track record of honouring its commitments, has a strong and solid financial and asset base, conservative investment strategy and consistently high bonus rates that are combined with a capable agency and staff.

Siddharth Iyer is GM and principal officer, Geminia insurance Co. Ltd