Digital disruption, developing products for the masses and sensitisation are some of the major ways driving penetration
The Kenyan insurance sector is characterized by cut-throat competition, but with very low insurance penetration. Despite there being a range of insurance companies, brokers and agents, and a lot being done by the State to increase penetration, lack of sensitisation to the public remains a major hindrance.
According to Sammy Kiragu, managing director at Sedgwick Kenya Insurance Brokers, the issue of penetration has been a narrative for many years, and there must be a paradigm shift.
“The major challenges to penetration remain concentration of marketing services to corporate clients and the working population, lack of distribution of insurance products across the country, lack of awareness among Kenyans, poor perception, as well as lack of products designed to reach the masses,” he says.
However, the development of information technology is currently fueling insurance penetration. “We have seen insurance companies developing products for individuals at the lower end of the pyramid, who were previously left out, and then promote them through online platforms.”
It is expected due to innovation growth, companies will reach the masses by selling and distributing insurance on mobile platforms.
Furthermore, the government and regulatory bodies such as the Insurance Regulatory Authority (IRA) are facilitating training initiatives across the county to educate people about insurance and how it can improve the general welfare of the population.
Kiragu, who joined Sedgwick in 2009 as the general manager and appointed the managing director in 2014, has played a major role in steering the company’s growth. Today, the company has a staff base of 30 fully qualified professionals.
Incorporated in 1984, Sedgwick is one of the oldest insurance brokers in Kenya. It is a subsidiary of Sedgwick United Kingdom.
The firm is a corporate broker and offers general broking services and medical insurance.
It has specialized in unique business classes including marine, energy and infrastructure insurance. Kiragu says because of this, the company has handled some of the biggest accounts in the country such as Airports Liability Insurance, Kenya Pipeline, and The Kenya Power and Lighting Company (KPLC) among others.
Furthermore, Sedgwick is registered by the Retirement Benefits Authority (RBA) to offer pension administration. It is also the global correspondent of Gallagher Global Alliance.
Since establishment, the Insurance Broker has been at the forefront in providing innovative and cost-effective insurance solutions to clients in diverse professions, in both the public and private sectors.
Role of insurance brokers
Brokers play an essential role in the insurance value chain. To begin with, they are considered professional advisors for the clients. They are able to put in place insurance packages that fit the clients’ needs.
Secondly, they offer value addition services such as risk management, claims and portfolio management, and clients’ relationship throughout the year.
Generally, brokers coordinate the whole insurance process and ensure clients get value for money. They are well versed with products that they recommend to the clients, besides investing in training and information technology to increase efficiency in service delivery.
Unlike insurance agents who work for insurance providers by selling policies, brokers are independent and offer independent advice. They are able to deal with, and understand the whole market, and in turn offer the best advice to the clients.
As independent professionals, brokers are expected to have a professional indemnity cover as they are held accountable for the advice given to the clients. Indemnity insurance protects against claims arising from possible negligence or failure to perform that result in a client’s financial loss or legal entanglement.
The current wave of digital disruption is expected to affect the insurance industry both positively and negatively.
Positively, for the brokers who will embrace technology in their service delivery to enable them continue to interface with insurance companies and clients. Due to information technology, brokers can offer better services.
On the other hand, it could spell doom to brokers who will not embrace technology, since people have a wider choice of buying insurance products, mainly from insurance companies.
Kiragu however says brokers don’t perceive digital disruption as a threat, but as an opportunity that they are leveraging on to drive penetration.
In a bid to fuel penetration, insurance companies are designing and developing products for individuals as well as small and medium enterprises who were previously left out. Besides, there has been a lot of growth in medical insurance as a result of greater knowledge and sensitisation among the population.
“The entry of banks as insurance distributers, through bank assurance, is a major development,” offers Kiragu. It was expected that banks would use their massive database to reach many clients and grow penetration. However, a huge population of Kenyans is now banked, but still lack insurance cover.
In this regards, the managing director recommends enabling people so that they have extra income and assets to create the requirement for insurance.
Another suggestion is paying more attention to insurance linked to investments such as unit linked life products. In the past, people only bought insurance for their assets such as motor vehicles, something that is changing over time.
Furthermore, life insurance holds the key to growth. By benchmarking with countries such as South Africa where penetration is high, the bulk of insurance is life.
“Unlike other countries whose life insurance sector is doing better than general insurance, Kenya’s life insurance segment is not well developed and hence provides an opportunity.”
Insurance, like any other financial sector, is affected by economic indicators. Lack of new investments mean there is no growth in insurance incomes.
The industry is also characterized by numerous players, resulting in price undercutting. “Many companies posted losses or decline in profits for the year ended 31 December 2018,” reveals Kiragu. It means insurance is not registering growth due to depressed economy.
The matter is further complicated by rising cost of doing business, for instance increasing medical costs. It means that while insurance cost is decreasing, the cost associated with delivering insurance products is going up by the day.
The role of underwriters, insurance brokers and intermediaries must be well defined. It means re-examining the regulatory framework to ensure all the parties are playing their roles positively.
Despite these challenges, Kiragu says we should expect consistency from Sedgwick Kenya Insurance Brokers.
“In the recent past, we have been rebranding ourselves with the intent to widen our distribution networks, starting up with the use of social media and opening up in areas with potential for growth.”
In the near future, the company plans to open up offices in major towns in the country, and further widen its reach to the East and Central African region in the next five to ten years.
“We also intend to diversify the business from just concentrating in general business, to offer medical services, SME and personalized business, and life products,” he concludes.