When Association of Kenya Insurers (AKI) released it’s 2018 insurance industry report few expected the shocker that the results would provide.
Insurance penetration in the economy relative to the Gross Domestics Product (GDP) fell from 2.7 percent in 2017 to 2.4 percent in 2018. Overall premium increase was recorded to Kshs 216.11 billion from 210 billion the previous year.
The fact that the results showed a decline in insurance penetration in the insurance industry was something that most people didn’t expect especially with the hype that we get of how the economy is doing well.
The results are a true reflection of the industry noting that they are actually audited figures from the various insurance companies. This contrasts sharply with the unaudited figures and subsequent reports that come from those figures always released by Insurance Regulatory Authority (IRA). Perhaps it’s time IRA left that work to AKI if they cannot publish results from audited figures.
The results showed were a reflection of what I have always warned about the industry that we cannot neglect the industry in not investing in the key areas and still expect magical results that will show a positive growth in the industry.
Hundreds are spent on phantom projects by IRA in form of training in the counties called Executive Certificate of Proficiency (ECOP). The training is supposed to improve penetration of insurance in the country by educating the public on insurance matters and most importantly interesting members of the public with getting into the insurance industry and actively selling insurance to the public.
Bima Intermediaries Association of Kenya (BIAK) recommendations
The project, as usual with government projects hastily thought out and implemented, has been a total failure but the regulator continues spending money on the project. The number of people interested in joining the industry as a result of the training is negligible, to be polite, and the millions spent on the same has been a total waste. We gave our suggestions on the best way to go about those trainings, that it would be more beneficial to the industry if the money was spent on the intermediaries in the industry since they are already the people actively practicing and people who need training so as to up their skills.
Of course our suggestion fell on deaf ears and the various associations in the industry, especially Bima Intermediaries Association of Kenya (BIAK) for the insurance agents, has to struggle to educate its members with the meager resources available to them.
It is therefore not rocket science to see that insurance growth is not happening in the industry despite the millions being spent every year on those trainings by the regulator. Another factor to consider of how wrong steps are taken in the insurance industry in a bid to grow the industry is the introduction of banks. These were meant to reach previously unreached population in Kenya so as to increase penetration. But this attempt fell flat on its face because banks were never interested in selling insurance to the masses but to get insurance premiums which they can use to trade with.
Banks also never heeded insurance laws in practicing insurance and they coerce and induce our clients to take up insurance with them resulting in creating a bad atmosphere in the insurance sector. This atmosphere is ruining the attractiveness of insurance to the masses with many people now talking ill of it.
We also have bad policies being introduced into the Insurance Act, policies meant to curtail the workings of intermediaries in pursuit of insurance business. These do nothing for the growth of the sector. While we cannot comment on some of them because the matter is in court, it shows the seriousness of some of these policies.
Technology could prove a game changer in the insurance industry if used wisely. Blockchain technology, internet of things, innovation hubs and regulations being adopted to promote online sale of insurance policies are some of the ways that insurance penetration in Kenya can be achieved.
Intermediaries should be at the center of all that is being done in the industry because it is through them that insurance penetration will be increased, and all these other ways that are not working should be done away with. The services sector in our economy, of which insurance is one of them, is the highest producing at 71 per cent, followed by agriculture at 15 percent and industry at 14 percent. It therefore behooves on the government to properly make laws suitable to the increase in production of this very important sector.
By Washington Ndegea
Bima Intermediaries Association of Kenya (BIAK) Chairman