Increased demand for property insurance has seen non-life insurance premiums rise steadily in Kenya, according to various reports and industry experts.
According to an A M Best report dated March 2014, Kenya, Ghana and Nigeria have witnessed a rising take-up of life and non-life insurance services. Titled, The Africa Market Review: Gearing up for Sustained Growth, the report noted that premiums have been growing by double digits, fuelled mainly by the non-life sector.
The report said that insurance premiums in Kenya stood at Sh112 billion in 2012, a 24.5 per cent growth, with non-life insurance standing at 65.8 per cent.
Martin Dias, CEO of Financial and Property Consultants Limited, observes that today, many homeowners not only need an insurance policy that will safeguard their property, but that will also guarantee them financial protection when purchasing that dream house or land.
Insurance companies in the country offer a wide range of property coverage: some cover specific perils like fire, explosion, wind, vandalism and terrorism, while others cover open perils.
Experts observe that more comprehensive, open peril coverage tends to be more expensive.
“The insurance can also be structural or content oriented, where the former covers the building and is mostly recommended for landlords while the latter, mostly recommended for the tenants, covers the property in the building or your belongings,” says Dias.
He advises that property owners and those leasing space to other parties need some form of property insurance.
Dias says it is important for a property owner to understand the property insurance policy before committing to it. “Never sign an insurance policy blindly – or just by trusting the word of the salesperson. Always seek to understand what the policy covers, and more importantly, what it does not cover,” he says.
What informs property insurance premiums? Dias observes that construction material used in a building is mostly factored in policies covering against fire.
He says buildings made of potentially combustible materials like makuti roofing will have higher premiums, while those made of fire-resistant materials could be lower.
Rates for a building whose fittings and fixtures are imported will also be higher than those constructed using locally available material.
The location of the property also influences the premium rate. Premiums may be higher if the property is in a high fire risk area, flood-prone or other natural calamity-prone areas. If the property is located in a crime-prone area, if the building costs in the area are high and access to a fire station is far, the premium will be high.
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Replacement cost is another factor. The larger the property and the more contents it has, the more it will cost to replace, thus the higher the premium.
Personal insurance also comes in. Dias says that this is one issue that most property buyers barely have knowledge about.
“When purchasing a property, especially through mortgage, you are required to also take a personal life cover to safeguard your family against having to bear the burden of repaying the loan in case of death,” Dias notes.
This means if you work in a hazardous environment or have a terminal disease, you might have to pay a higher premium, he adds.
Other factors that might influence the premium amount is if the property is not fitted with a security alarm and a fire alarm; the proximity of the property to an external fire hazard such as an oil storage tank.
“Remove all possible hazards before applying for coverage. Look at your business premises or house and operations carefully to get rid of anything that could increase the likelihood of an insurance claim. Improving employee safety, security, and inventory management might reduce the amount you pay for property insurance,” he says.
Shirish Shah, Managing Director of Greenspan Investment Limited, says that property insurance is important, especially now that many people live in flats where a building might just catch fire due to individual’s negligence.