Insurance dates back to the early natural or non-monetary human society, which entailed agreements of mutual aid. If one family’s house got destroyed, the neighbours were committed to helping rebuild it.
This early society was later followed by monetary economies (with markets, currency, financial instruments and so on). The Chinese and Babylonian traders were the first to practice risk transfer or distribution in the monetary economy.
Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit losses due to vessels capsizing. The Babylonians developed a system where, if a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen or lost at sea.
Insurance became more sophisticated in Enlightenment-era Europe. Some forms of insurance developed in London in the early 17th century, which were then adopted in Africa.
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In Kenya, the first locally incorporated insurance firms started operating in the 20th century. According to the Insurance Regulatory Authority of Kenya (IRA), there were 55 registered insurance companies in 2016, with an insurance penetration rate of less than 3 per cent.
This rate is very low when compared to the other sectors that have seen a burst in numbers driven by technology. For instance, the mobile banking sector now boasts over 70 per cent coverage.
A number of factors have been cited as the cause of the low insurance penetration: cost, distribution model, service, awareness, and above all, the trust a claim will be settled when it occurs.
While there is no magic bullet for all these reasons, insurance companies and associated channels can use technological innovations to counter these elements.
Insurance distribution and servicing in Kenya has been manual. Several pages need to be filled by a policy proposer, which have to then be captured into the intermediary and insurer system before the policy can be issued. This takes time and is one of the cost drivers.
Insurance companies will benefit if they rode on mobile apps that are linked to mobile money platforms.
The sector also needs to move away from manual filing of claims forms. You can now renew your driving licence online and this can be verified by the authorities, so why should the insurance sector still have a motor sticker on cars when this can also be done online?
The claims reporting process can use mobile apps, coupled with centralised vehicle tracking mechanisms. For instance, the use of telematics can help monitor driver behaviour, accident scenes and compensate immediately, and reward careful drivers or vehicle owners.
While individual insurance firms are investing heavily in awareness, this needs to also be driven by the Government. A centralised awareness platform will help grow this. The Government also has a role to play in ensuring that technology is embedded in the way insurance companies operate.
For instance, electronic medical claims submissions from hospitals, standardised coding for various diagnoses, procedures and drugs should have been made mandatory through Government intervention.
The Government also needs to put in place a data-sharing platform for insurers to shield them from undercutting and losses.
Each year, one million Kenyans drop below the poverty line due to medical costs. Introducing compulsory medical insurance with some minimum benefits may help insurance firms design out-of-the-shelf products that can be easily sold through technology platforms. Implementation of these initiatives will bring down the cost of insurance and, thus, increase penetration.
The writer is regional head of medical strategy, Jubilee Insurance. [email protected]