New approach: Micro-insurance has a big untapped potential
SEE ALSO :Britam unveils lifetime coverInsurance plays an important role in protecting individuals, households and businesses from unexpected events such as death, illness and loss of property. Insurance is an effective tool for financial inclusion, especially in relation to micro-insurance. The latter refers to insurance products tailored for low-income households and small businesses. Vulnerable segments The emergence of mobile money as a disruptive force has also forced a rethink of financial inclusion from the perspective of the poor and vulnerable segments of the population – the so-called "bottom-of-the-pyramid". Rapid growth of mobile money even among the low-income population has exposed the vast potential of this market from a financial services and micro-insurance standpoint.
SEE ALSO :Nurses get negligence protectionWith an estimated 88 per cent penetration rate, mobile money in Kenya can be a significant driver of micro-insurance penetration. The phenomenal success of mobile money products such as M-Pesa and M-Shwari points at the huge untapped market for financial products targeting low-income households and businesses. There have been attempts in the past to leverage mobile money to introduce micro-insurance products into the Kenyan market, although these have not always succeeded. Inability to properly factor risk and meet regulatory requirements have been cited in various studies as the main hurdles. As such, micro-insurance penetration in Kenya remains low despite a high level of mobile money adoption. The low-income market is financially risky considering that the majority lack formal, regular income and thus do not perceive insurance as a priority. This makes it hard for insurers to project and earn consistent premium income into the future. Financial illiteracy and prevailing social attitudes such as the popular fund-raisers to meet emergency financial needs like hospital bills also make insurance a difficult sell.
SEE ALSO :Doctors insured against medic errorsFrom a regulatory perspective, the main challenge lies in developing micro-insurance products that serve the low income population but also are fully supported by premiums. The viability of an insurance product depends on the ability of the insured to consistently pay premiums. Less bureaucracy Affordability of premiums, less bureaucracy, fast claim settlement, efficient delivery channels, and simple policy terms are just some of the essential features of a good micro-insurance product. Surmounting financial and regulatory barriers to micro-insurance uptake requires innovative approaches. Riding on mobile money platforms and channels to increase access to micro-insurance products is one such approach. Another sound approach is in combining financial products like banking and insurance. With bancassurance now a reality in Kenya, banks and insurance companies can partner to offer products that are affordable and accessible to everyone.
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