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Challenges facing insurance brokers in Kenya

By James Wanzala | Published Tue, March 6th 2018 at 08:22, Updated March 6th 2018 at 08:28 GMT +3
Association of Insurance Brokers Chairman Nelson Omolo.(James Wanzala,Standard)

Insurance brokers have warned of a looming extinction of their business as underwriters increasingly opt for direct contact with policy buyers. The Association of Insurance Brokers of Kenya said direct procurement, especially by public entities, has emerged as one of the trends that threaten their survival. Mr Omolo talks to Financial Standard about the challenges facing the sector and how they overcame them.

What is the current insurance uptake in Kenya compared to her peers?
It’s not good and not bad. The current average insurance penetration level in Kenya is at three per cent of the GDP compared to South Africa at 12 per cent. In the East Africa region, we are followed by Tanzania and Uganda at less than one per cent.

There is a drive to sell insurance to millennial from this year, why now?

Research carried out both by Insurance Regulatory Authority (IRA) and other global bodies has proved that the millennials will be the greatest consumers and that’s why we are targeting them. Historically, many of the insurance products sold then targeted the old. Millennials are also able to spend without a blink and are able to appreciate the products much more. The micro- insurance is some of our target areas, where we use mobile phones to reach them.

What has caused low uptake of insurance services in Kenya?

If you look at the traditional products we have been selling in the past, they have been targeting the rich but now you find that their focus is now shifting because they are not many and it’s now better to focus to the middle class who are increasing day by day and the reach will be wider.

How have fake claims affected insurance revenue and what plans do you have to reduce this?

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Motor insurance cover has been particularly a big problem to us especially Public Service Vehicles followed by medical. This is perpetuated by the value chain. Part of the solutions being sought is to address the supply chain is by having designated suppliers of spare parts for instance in motor covers.   The insurance industry is also now working with National Transport and Safety Authority to have matatus and buses record numbers and names of passengers travelling in their vehicles so that in case of an accident, there are no ghost claimants. In medical, insurance companies are now coming up with biometric cards to curb fraud.   We are also working on pre-agreement arrangements for instance how much does it cost for award bed in private and general ward in advance so that nobody is tempted to overcharge. According to Insurance Regulatory Authority (IRA), 2016 Report, fake claims against genuine is about 80 per cent depending on class and motor against medical is about 80:40.

What activities are you putting up to ensure insurance uptake grows?

With help if IRA, we have embarked on activities aimed at education awareness and protection of consumers by brokers. We are engaging with our intermediaries on understanding of policies.   We are also training our staff to make sure that the claimant understands the policies to bring about better understanding of insurance policies. We hire facilitators to train staff on how to articulate the policies and public relations.   In 2016 it was near Sh400 billion, in 2017 the report is not yet out and we project it could be reach Sh500 billion this year

What about the negative public perception about insurance brokers?

Indeed, there has been that negative perception about that term brokers and it has been a historical problem. We blame it on how insurance was introduced in Kenya, making it a foreign business and hence lack of understanding.   The language used was also hard to understand and the general feeling was that insurance was making money by disappointing their clients. However, over time, a lot has been done including standardising insurance language.   Terms like indemnity and the process of claiming have been simplified. Today’s insurance agents are also well trained and can advise one well thus changing perception.

There has been an outcry by insurance brokers that they do more work yet get low commissions. Your comment?

Currently, we are paid 10 per cent of the premium for motor and 25 per cent for fire which is not adequate. We are in discussions with IRA to change from being paid by regulated commission rate to fees because we feel what are doing is much more to be paid by commission. You find that sometimes a broker may spend a long time advising a client and he or she may not buy the insurance immediately. We offer professional service and follow up your claims.

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