Why local firms shy away from innovative products outside the law

Insurance Regulatory Authority Chief Executive Godfrey Kiptum says high costs come with the introduction of new products into the market. [File, Standard] The insurance regulator has noted reluctance among sector players to introduce new products into the market, away from what is anchored in the law, such as third-party motor vehicle covers. Commissioner of Insurance and Insurance Regulatory Authority (IRA) Chief Executive Godfrey Kiptum referenced high costs that come with this process as one of the reasons. The same view has been expressed by Standard Chartered Bank (Kenya) Chief Executive Kariuki Ngari, who said there is a need for players to introduce world-class products that fit the Kenyan market. Mr Ngari said that during his time in Singapore, where he was the Global Head, Retail Distribution for Standard Chartered, Singapore, he witnessed a range of products that were not available in the Kenyan market. "I kept on asking myself, why can't we make these available for Kenyans as well," he said. He noted low insurance penetration figures in Kenya while pointing out the need for Kenyans to embrace products that safeguard their wealth and livelihood, on top of those offered under general insurance. "We need to move away from hand to mouth, or leaving everything to fate; or your brothers, sisters or coworkers helping you in times of tragedy," he said. He added that while insurance has been offered in Kenya for a long time, it is yet to be fully embraced. "We only take insurance because the laws require us to take third-party cover for your car. Anything else that is voluntary, like life, we do not want to touch," he said. Mr Ngari was speaking during the launch of two products -LivLife and Future Ready - in partnership with Prudential Life Assurance. These products target high-net-worth individuals, including top executives and entrepreneurs. "For our clients and most people, you are not working hard for your wealth to end with you. You want it to go to the next generation. How (then) can insurance protect you?" he asked. Apart from motor vehicle third-party covers, medical is also a mandatory cover when it comes to employer-employee relations. According to the Employment Act (2007), which specifies the Employment (Medical Treatment) rules, 1977, employers are required to cover the treatment costs of their employees. "Where there is reasonable cause to believe that any employee is suffering from illness or injury, whether contracted as a result of the employee's work or not, every employer shall, with the consent of the employee, cause to be provided to such employee medical treatment," the rules in the Act state. "The treatment provided under sub-paragraph (1) of this rule shall be at the cost of the employer unless provided free by the government." This, in extension, has seen major employers providing medical covers to fulfil this part of the law. Mr Kiptum noted that while Kenya's insurance market stands at 2.4 per cent penetration, the global average is six per cent. However, the 2.4 per cent penetration still makes Kenya the third largest market on the continent. He explained that insurance penetration goes hand in glove with a country's gross domestic product (GDP). "If the GDP (gross domestic product) and wealth that needs to be protected is very small, then you concentrate on the subsistence," he said, referring to general insurance mandated by law. Mr Kiptum said most players in the market are relying on compulsory classes of insurance to do business. "Anyone in the insurance space will agree that we want to sell things that are compulsory because it is easier. People would come to you, and you do not have to do anything about it," he said. The Commissioner, giving an example of life products which are not mandatory, noted that meeting the grain needs is not easy for businesses. "You (insurance firms) have to work harder than people who are in general business," he said. He said firms need to bring world-class products into the market to attract the attention of consumers. "Some may not, but some will have," he said. "If you place emphasis on the other classes of insurance, you probably have a chance of making (more) money or an impact in the society than concentrating on those mandatory classes that are also complicated and prone to fraud." "We need to protect the livelihood of our people. If we agree that that is the goal, these other ones (general business) will come anyway." Data from IRA shows more inclination by insurance firms to general business when introducing new products. In 2022, IRA approved 15 general insurance products and three long-term products. In 2023, the regulator approved 14 general insurance products and 12 long-term. Referencing on the process it takes to approve products, which players have noted to be long, Mr Kiptum said the regulator looks at all items line by line for the sake of the consumer who might not go through it. "Your clients will only look at it at the point of making a claim. That is why we take time to look at it so that we give protection to policyholders so that whatever you buy is exactly what you get," he said. Gwen Kinisu, Chief Executive of Prudential Life Assurance, noted that the industry is witnessing a demand of products away from general insurance. She said there is a transformation on how Kenyans, particularly the affluent and emerging high-income class approach financial protection. "More clients are demanding personalised high value insurance solutions that align with their life goals," she said. She said the two products launched in partnership with Standard Chartered seek to feed into this demand. One of them, LivLife, offers protection of up to Sh500 million. "We are seeing a significant uptake in demand for wealth protection and legacy planning especially among executive business owners and entrepreneurs," she said.

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