Insurance usage drops by 70% amid financial strain - survey

There is a drop in insurance cover usage among Kenyans, the 2024 FinAccess Household Survey shows.

According to the report, the number of those using insurance cover, excluding the now defunct NHIF, dropped by about 0.13 million from 1.9 million in 2021 to 1.77 million in 2024.

This decline indicates the trend of reduced disposable income across the population.

"This could be attributed to the fact that the majority of Kenyans are employed in the informal sector where incomes are irregular," the report says.

"Traditional insurance requires fixed regular premium payments; failure to pay may lead to policy lapses which further disincentivises these individuals from purchasing insurance," it says.

The survey also indicates differences in the use of insurance between genders and livelihood categories.

The report says 70.5 per cent  of the respondents did not use any insurance cover, 22 per cent used secondary insurance plans, and only 7.5 per cent had primary insurance coverage.

 In the use of insurance, men had a larger proportion compared to women.

The data also indicated a wide variation in the use of insurance between different employment sectors.

Employed people had the highest number of users, standing at 660,000, followed by those self-employed, who had 450,000.

This is likely because employed people have a relatively stable income, which makes them more likely to be able to afford insurance either from their pocket or through cover provided by their employer.

The casual workers and dependents were the least likely to use insurance, with only 140,000 and 240,000 people reported to have a cover, respectively.

The most common channels for insurance premium payments were mobile money and employer-paid contributions.

 Over 49 per cent of respondents stated that they pay via mobile money, whereas 43 per cent benefit from employer-sponsored premiums.

However, the survey brought out one major problem regarding the claims settlement ratio.

Over 44 per cent of respondents cited overdue premium payments as the reason their claims were not paid, with men being more affected (45.5 per cent ) than women (42 per cent).

Another 39 per cent pointed to claims being rejected due to risk coverage exclusions, and 26.5 per cent mentioned refusals by NHIF or insurance companies to process claims.

The findings suggest that a lack of awareness regarding policy terms and rights may contribute to these issues.

In summary, while insurance is still a vital safety net for many Kenyans, the 2024 survey has highlighted financial challenges, a general lack of awareness about policies, and difficulties in paying premiums as reasons affecting the level of coverage and claims.