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The number of microinsurance products has increased in Kenya in the past seven years from 32 in 2015 to 55, according to the findings of a survey by the Association of Kenya Insurers (AKI).
Health insurance, personal accident, and last-expense insurance are noted to be the most popular microinsurance products demanded by consumers and have the potential to grow and cover a wider section of the population. The study also emphasises the need for simplification of products and the simplification of the language used to communicate about these products.
“Microinsurance products have increased both in number and type. While a few have been dropped, these have mainly gone through restructuring and rebranding,” said AKI in the report.
The survey also finds that the number of microinsurance underwriters grew from 11 in 2015 to 18 in 2022, implying growth potential.
Distribution
Mr Tom Gichuhi, AKI executive director, said during the launch of the survey results earlier this month that the findings show strong evidence of the role partnerships with a wider variety of institutions can play. He said, “For microinsurance to work, we need to partner with a wider variety of institutions including development partners, InsurTechs and technology partners, the government and other business associations and aggregator groups such as SACCOs (savings and credit cooperative societies), churches and others. I am glad to note that the microinsurance regulations allow for insurance distributors to be non-insurance players.”
Other key issues highlighted by the survey include the need to leverage digital channels to distribute microinsurance and the need to have price flexibility on premiums. These two factors will increase insurance access and affordability.
Key barriers to the growth of microinsurance
The survey findings show that key barriers that limit the growth of the microinsurance industry include:
1. Existing underwriters prefer to implement microinsurance within the preexisting conventional insurance business licence.
2. High share capital of KES50m ($362,000).
• Although perceived as much lower than that of conventional insurance, some perceive it as still high
3. Product licences that expire yearly. The licences of some products can be renewed for longer periods.
4. Limitations of the current regulations on product innovation
• Some of the products have already been positioned as microinsurance products but do not necessarily meet all criteria for such products
• Products that would meet current regulatory criteria would likely be limited in innovation, profitability & sustainability of the microinsurance business
5. Some aspects of the regulations are not well comprehended
6. Microinsurance should have special tax rates to allow more competitive pricing of the products
7. Agents receive the same commission rates whether selling microinsurance or conventional insurance
• The commission rates for agents who sell microinsurance products are similar to higher premium products
8. Insurance companies should be allowed to innovate products without having to obtain new approvals from the Insurance Regulatory Authority (IRA).
• Products offered are to be driven by a particular need in a situation that does not limit innovation
• Product development and approval should be flexible to allow innovation whilst protecting policyholders
9. The time when claims are supposed to be settled is perceived as being ambiguous.
• The time limit given for claim settlement of 10 days is ambiguous as different claim settlements vary according to need.
10. Expanding the stakeholder group would enable wider distribution.
The survey, conducted by research firm Ipsos this year, engaged a wide variety of stakeholders including insurers, potential and current customers, insurance intermediaries, development partners and InsurTechs.
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