How insurers can break the stagnation jinx

Industry players seem to agree that other products and services move faster than insurance services, but insurers do not seem to have found a winning formula yet. FILE 

By David Mugun

Considering life’s many uncertainties, one would think that insurance, especially for the educated, would be a must-have service. In many places around the world, not having a cover is like tax evasion; yet the majority of Kenyans do not have any form of insurance.

In countries such as South Africa and in the West, the insurance penetration levels are at about 10 per cent of the Gross Domestic Product (GDP), compared with Kenya’s three per cent. This in a market with more than 43 insurance companies.

In industry circles, the common refrain is that insurance is the only thing that is sold. All other products and services are bought. This amounts to an admission that other products and services move faster than insurance services. Even with this fact out there, the insurers do not seem to have found a winning formula.

Yet a look at the market reveals that the answer to the low uptake of insurance lies with the insurers.

Outsider view

I was once an insider and too blind to see what was happening. But from the outside, I can now clearly see what ails the industry.

For starters, the only books or documents of law that are widely read and remain inspirational despite being in fine print are religious books —the Bible and the Koran and those of other religions. Searching for inner meaning is critical and cannot be deterred by fine print.

On the contrary, policy or insurance contract documents do not inspire at all and something seems hidden in the small print and hence the mistrust. Perhaps if policy documents came with reading glasses, then the sense of concern would draw crowds.

As a service, insurance should rely on captivating and realistic physical evidence to inspire customers; policy documents must become inspirational.

Secondly, Kenya’s insurance industry, has positioned itself behind all other financial services providers. At the government payroll department, the State is first on the queue taking away what is statutory — PAYE, NSSF and NHIF. It is followed by financial institutions that have lent money or entered into hire purchase arrangements with the civil servants.

The next level is reserved for sacco deductions; then at the very bottom, comes insurance deductions. Therefore, when an employee exceeds the statutory deductions threshold, insurers go without their share, leaving them weaker.

Even in the eyes of Kenyans, insurance does not seem to rank highly because the industry has not managed to position itself well in the minds of would-be policyholders.

I have heard and seen insurance advertising and publicity efforts and I do not understand why they attempt to use what works for Coca-Cola, big banks and petroleum companies who have already positioned themselves in the market and only use advertising to reinforce their products.

Making premiums as affordable as Coca-Cola products will turn in the masses making them pay for products. Insurers may not accept this, but too many of the industry’s products are designed for the “haves” and the supposed “have-nots” are left watching from the “kadogo” corner of the economy.

The “Tunawesmake” generation is also wondering why there are no suitable products for them.

Thirdly, too many cooks spoil the broth. The industry has far too many underwriters relative to the economy. Larger economies elsewhere have far much fewer underwriters. This is partly why undercutting was rife until the Regulatory Authority came in calling.

Fewer companies mean stronger insurers with wider niche markets that would then allow for informed decisions. This would also ensure enough resources are set aside for positioning of the respective companies and by so doing, positioning the entire industry.

Forty three companies and still counting, whose impact hardly accounts for three per cent of GDP, is not sustainable. If anything, they seem sustainable because the public is footing the extra cost through higher premiums.

Collectively, these shortcomings are the reason the government does not give the industry as much attention as the banking sector in key policy statements such as the Budget.

Banking is more than five times the insurance industry, contributing about 16 per cent of the GDP. Being more trusted it is in a better position to drive the ongoing banc assurance efforts. 

Laws that prevented the convergence of financial services may have stunted the insurance sector, but there is an opportunity for impressive growth in banks that own insurance brokerage firms.

Growth of the sector will be positively impacted by channels that reassure the public and cultivate trust. Financial products are complex in nature and rely on effective delivery and transfer of meaning to find a market.

Today’s would-be-consumer is alert and aware of what is going on. On the other hand, insurers continue to use the same old methods of selling instead of spending time interpreting today’s dynamics. 

Also insurance industry captains seem to outlive their peers in other industries. This can signify stability, or intolerance to change. Robust companies such as the KCB have a defined limit on length of stay in the board, and the company continues to grow.

If anything, its profits are far much higher than the entire insurance industry’s profits combined, pointing to the need for change in the insurance sector.

Mr Mugun is the author of the books ‘How to Undo Life’s Airlocks’ and ‘10 Critical Success Answers for SMEs’ and director of special projects at Strathmore Business School.