Insurance literacy builds trust, mitigates potential conflicts

Kenyans have, from time immemorial, engaged in various insurance practices ranging from the simple to the highly sophisticated.

The idea was to shield themselves from the impacts of natural disasters which were as common then as they are today.

It was common for families to give some of their livestock to relatives and friends residing in faraway locations for safekeeping.

That way, if the family lost their livestock to theft or disease, they would not have to start from zero.

They would simply get back what they gave away together with any offsprings realised over time.

The host family would, during the period they manage the investment, benefit from milk, manure and some of the offspring as agreed with the owner.

Our people also had various insurance practices around crop farming. One of these was selecting the best crop and storing it, usually above the fireplace, to serve as seed in future seasons.

The idea of keeping the selected seeds in the rafters above the fireplace was that it was the safest place where mold and pests would not attack the critical investment.

Where a crop failure happened due to drought, locusts, or worms, at least families would have seeds for the next planting season.

Insurance, therefore, is not a foreign concept to Africans in general and Kenyans in particular. It was, and remains, very much part of the African political economy.

Despite this fact, insurance uptake remains so low it should worry all of us.

Statistics from 2022 indicated the national insurance penetration rate stood at 2.29 per cent against the global penetration rate of 6.7 per cent.

According to the 2021 FinAccess national survey and the Kenya Demographic and Health Survey (KDHS 2022), only one out of every four Kenyans has access to health insurance, a 16 per cent drop compared to 2019.

Further, most Kenyans (71 per cent) cited lack of affordability as the reason for low health insurance uptake, followed by lack of knowledge and awareness (about 20 per cent).

Although these studies were specific to health insurance coverage, they mirror the state of insurance coverage in general.

Two lessons can be drawn from these studies. The first is that we need concerted education across all demographics to reach those who do not know insurance and remind those who know what is available in the market.

Without the right knowledge, individuals and families can’t make informed decisions and, as a result, may be found unprepared in times of loss or emergency.

Therefore, stakeholders in the insurance sector must educate Kenyans on available insurance options, dispelling misconceptions surrounding this vital industry.

The second lesson is to address the affordability challenge. There are many Kenyans whose incomes are low and are, therefore unable to access insurance because they simply can’t pay for it.

On this, the industry needs to be more innovative, developing products for low-income demographics that can be profitable by leveraging numbers.

A lot of innovation is ongoing in the industry, and we now have policies that are flexible and unique in their approach.

For instance, smallholder tea farmers are known to receive bulk payments once or twice a year.

Premium payment for this demographic can be once or twice a year instead of monthly. There are also small traders commonly referred to as mama mboga who make small profits on a daily or weekly basis.

This demographic can do better if allowed to pay premiums weekly or even daily.

There is a twist to this affordability issue as some of it is informed by long-standing misconceptions.

Some of the people who believe this ‘insurance is expensive’ narrative will have a budget allocation for everything else except insurance.

These misconceptions can be addressed through education and building trust.

For potential and first-time insurance buyers, a comprehensive understanding of available coverage types is particularly important.

This knowledge not only facilitates informed decision-making from the outset but also builds trust and mitigates potential conflicts with insurance providers in the future.

To foster insurance literacy and build trust, industry collaboration and leveraging digital tools are imperative.

What must be emphasized is that insurance is not an expense but an investment.

It is an investment that has kept businesses running, kept families together, and saved lives that would have been ruined.

The writer is the Britam General Insurance CEO and principal officer.