Why insurers are picking priceless intangible assets

A happy woman. Happiness is a valuable asset. FILE PHOTO | NMG 

By QUEEN MUNGUTI

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Summary

• There has been a rise in the insurance industry to cover intangible assets, which according to research represent 80 per cent of companies’ value.
• In a 2017 industry report titled Commercial Insurance: Innovation to Expand the Scope of Insurability by the world’s second-largest reinsurer, Swiss Re, it showed that intangible assets accounted for 87 per cent of the total market valuation among Standard & Poor’s 500 companies in 2015.

APA insurance last week unveiled a brand campaign called ‘Insuring Happiness’ as intangible assets become the focus of insurance companies and a move that coincided with the release of the 2018 UN World Happiness Report in which Kenya was ranked 124 out of 156 countries, a drop from position 112 last year.

The UN report looked at migration within and between countries and from this it analysed whether the people who are on the move in search of a happier life had achieved it using data collected from 2015 to 2017.

In this, Kenya ranked poorly and APA insurance is seeking to reclaim the happiness in its campaign that revolves around the belief that insurance is about people, not things and a marketing strategy that can capture the attention of consumers.

“It was created in a bid to add joy in Kenyans’ lives after a rough past year of elections that led to tough economic conditions by encouraging them to channel their inner child,” said Irene Ambani, an insurance analyst at APA Insurance.

On its social media pages, it has interacted with consumers asking them to name some of their fondest memories such as climbing trees, a family trip to the park or a school trip in a bid to evoke some happy memories. It is even getting its top management such as the group CEO Ashok Shah involved.

“The campaign will run until August and we will change our internal culture in order to align with it. We want to start a movement that reminds Kenyan of a time when they were happy and we are tying it with our brand to cement the fact that we are in the reinsurance business and are responsible for our client’s happiness,” said Jackie Tonui, head of corporate communications at APA Insurance.

For the insurer, consumer happiness is a valuable tangible asset that it is seeking to cover for consumers by providing quality service.

In a bid to keep up with the emergence of new risks, there has been a rise in the insurance industry to cover intangible assets, which according to research represent 80 per cent of companies’ value.

In a 2017 industry report titled Commercial Insurance: Innovation to Expand the Scope of Insurability by the world’s second-largest reinsurer, Swiss Re, it showed that intangible assets accounted for 87 per cent of the total market valuation among Standard & Poor’s 500 companies in 2015.

This is in comparison to 1975 when the share of intangible assets was just 17 per cent.

“Structural changes in the economy create new risks, such as supply chain disruption. The corporate sector has changed from being dominated by manufacturing, with physical assets, to services with mostly intangible assets,” reported Swiss Re.

READ: Mobile platforms likely to phase out insurance agents

Intellectual property, data, technology disruption, patents and customer relationships were some of the assets that companies were insuring against.

“To meet the needs of a service economy, new products are being developed, improving insurability and expanding the scope of insurance in risk management. New solutions can make risk transfer more efficient, reduce earnings/cash-flow volatility and support business growth.”

Recently, data has emerged as a valuable intangible asset that companies are seeking to insure due to the rise of cyber-attacks. In fact, 2017 research by global data analytical company Cybersecurity Ventures, predicts that cybercrime damages will cost the global economy $6 trillion annually by 2021.

Further research by French reinsurance company SCOR reports: “Cyber risks are strongly linked to intangible assets, which represent a growing portion of every company’s assets.

It is a perfect example of how complex risks can be today, as cyber is recent, intangible, invisible, cross-border, and rapidly developing, at a pace with technology. As a result, data becomes an increasingly valuable target for hackers.”

- African Laughter