New Insurance Model Changing Lives In Kenya
Despite the efforts of sub-Saharan African (SSA) insurers, most African citizens and small businesses do not yet have insurance. Research done by B2B international 2022 shows that more than two-thirds of Kenya’s population remain without any form of insurance. This number reduces substantially if compulsory insurance is not considered.
Many of the insurers that I spoke to reported that they struggle to make ends meet due to lower-income, less easy-to-reach market segments and face harsh competition in compulsory insurance markets to the extent that it threatens their bottom line.
Experts agree that life insurance, health, property, and business, among others can protect the most vulnerable and save souls from shock and untimely deaths.
According to Garance Wattez Richard, head of multinational insurance firm AXA’s Emerging Customers department, most workers in Africa lack traditional, employer-provided insurance as part of the informal economy.
“Most people have not developed the culture of insuring what they have. At the same time, insurers have been slow to tailor their products and services to the local realities of the African context, and have unsuccessfully tried to repackage complex and expensive products to fit the needs of emerging customers,”
Now, a new generation of tech-driven micro-insurance products is helping to fill the gap and provide a safety net for those struggling to make ends meet.
In the late 1990s and early 2000s, the development sector began exploring new forms of insurance in order to improve financial inclusion for vulnerable people in developing markets. A first wave of donor money flowed into the space.
In 2007-2008, the Bill and Melinda gates foundation issued grants of $34 to the International Labor Organization and $24.4 million to one of the world’s largest microfinance institutions, Opportunity International with an aim of supporting the exploration of inclusive insurance schemes. These products, simplified and cost-adjusted to meet demographic needs, became known as micro insurance.
“Micro-insurance is a lower-cost insurance product that can be accessible to people with low income. However, to attract the private sector without the need for donor support, it needs to be delivered at a large scale, for it to be sustainable,” said Emily Coleman, an insurance expert from International Fund for Agricultural Development.
While some companies are shifting to a private-sector-driven model, industry experts believe that donor money is still important to help in driving technological innovation in microinsurance.
“There’s a need for someone to fund the high-risk startups, many of which will fail, but some of which will succeed and will revolutionize the market. And I think that’s the role of the donors,” said Leftley.
A “second wave” of donor money is now helping micro insurance companies continue to drive innovation, by supporting pilots that are experimenting with how cutting-edge technologies can increase insurance penetration in emerging markets.
These methods have made it easier to ensure thousands of farmers in remote locations especially in Arid and semi-Arid areas across Africa, allowing them to better manage risks, invest more confidently in their diverse livelihoods, and increase productivity.
Michael Kisua, a maize farmer from Bungoma County, has encountered dozens of challenges with the crop, largely driven by unpredictable weather.
Kisua is on the list of millions of other small-scale farmers across the world who find themselves on the edge due to the rising threats of extreme weather.
“The recommended quality seeds are often hard to access but even after you find them, sometimes you’re not guaranteed good harvest due to rainfall failure,” he said.
Last year, the farmer took up a crop insurance package to cushion him from climate change phenomena such as drought and floods.
Kisua insured an acre of maize at Sh2,000 and got a Sh9,500 compensation.
“Shortage of rains has been an issue in this region; therefore, many avoided farming. However, when we realized that we can be compensated for what we lose, we are feeling motivated to farm again,” he pointed out.
The risks posed by climate change have been projected to rise significantly and farmers are increasingly being advised to take up crop insurance to protect them against losses triggered by weather unpredictability.
“At first, I thought insurance only applies to rich people. But look at me now. Through micro insurance on my phone, I am able to insure my crops (Agricultural insurance), considering the climate change risks,” adds Kisua.
“Whatever happens, I am guaranteed of compensation. In fact, I don’t need to travel to town to insure my crops. Technology has made it easier. I am able to do it at the comfort of my home. I am safe now”, he concludes.
As much as the insurance is for the good, not all people have embraced the idea. Some are still adamant in securing insurance. Probably due to a lack of understanding of the insurance by customers.
Timothy Tororok is a small scale farmer in Isiolo County who live in perpetual uncertainty from threats to each year’s harvest, such as poor rainfall and crop disease, but they have never bought insurance for it. Reason being fear of the unknown.
“I still have doubts that it will work. Am scared that when the time comes to pay you and insure you, you will not find them. They will come up with excuses that ooh, you didn’t do this, you didn’t do that”, said Timothy
According to Janet Mikosi, an insurance expert from Britam, most people do not understand how insurance companies operate hence leading to doubts just like in Timothy’s case.
“As insurance companies, we have a lot of work to do. There is a need for civic education for citizens in regards to how different insurance policies work in order to avoid cases and pointing fingers. There is lack of knowledge out here. Let us not assume people know these things. Let us simplify our terms for better understanding”, said Janet.
“We also need to improve market regulations through programs such as Access to Insurance Initiative, supporting the healthy development of insurance markets on the supply side, and providing information and increasing trust among consumers on the demand side”, adds Janet.
Microinsurance covers a wide range of risks: accidents, health, death, natural catastrophes, and property losses. It may also cover a single or composite risk. In Kenya, there are companies that offer micro-insurance services. This includes HF Group, Britam, APA Insurance, CIC Kenya among others.