Around 80 participants mainly from East Africa attended the event.
Sammy Makove, Commissioner of Insurance of Kenya, opened the conference on behalf of the Treasury.
Interactive workshops were part of the Microinsurance Learning Sessions.

Kenya aims to have an inclusive and competitive insurance market by 2030

Microinsurance Learning Sessions concluded on 7 April 2016 in Diani/Mombasa

In global terms, African citizens remain the most vulnerable people with the least access to insurance. To change this situation in its country, the government of Kenya is aiming at a more inclusive and competitive financial services sector, in which microinsurance is to play a key role, by 2030. Ideas that challenge conventional insurance approaches seem to be the road to growth. The question of how these ideas can result in viable business models was discussed during the 2016 Microinsurance Learning Sessions in Kenya.

The largest microinsurance market in East Africa
According to the 2015 Microinsurance Landscape Study, Kenya has the third highest microinsurance coverage ratio in the East African region. Nearly 6% of the over 45 million people living in the country are covered by microinsurance, making Kenya the largest microinsurance market in the region. In terms of comparable growth between 2011 and 2014, lives covered increased by 112%. As in most other countries around the world, life still dominates the microinsurance market in the country.
 

Figure 1: Percentage of population covered by microinsurance in East Africa
Source: The World Map of Microinsurance, 2016

The results furthermore showed that the greatest growth exhibited in Kenya was in agriculture, starting, however, at an extremely low level. So-called ‘other financial institutions’ remain the most important distribution channels, with the lion's share of this outreach being attributed to a single product sold through a bank. However, mass and other channels are becoming increasingly important, as they reached nearly one quarter of the lives covered in 2014, but still remain on a much lower level compared to Africa in general.

 
 
Figure 2: Lives covered by product cover in Kenya (million)
Source: The World Map of Microinsurance, 2016

Focus on customer value and sustainability
The conference took place at the right time in the region in which the market is expanding. Significant milestones have been achieved. However, half of the products that were introduced in the past were withdrawn within one to two years, according to the Commissioner of Insurance. The main reason for this is that apparently the products were not sustainable. “However, that does not send the right lesson”, said Mr. Makove. A wide range of issues regarding pricing, product design, distribution and, most importantly, efficient management of products remain to be resolved. “At every level we must make sure that products are sustainable”, concluded Makove.

According to research from the Financial Sector Deepening Kenya (FSDK), 40% of Kenyans do not buy insurance because they do not understand it. The main difference between insurance and most of the other products is that insurance is not tangible. When people receive a microloan, they walk home with money in their pockets. However, when buying insurance, the clients must pay money but only receive  a piece of paper and a promise. “Bring the insurance to the customer, and be there when they claim”, recommended one representative from the insurance industry. Trust, easy claims processes and value for the client are key success factors to long-term success and clients renewing their policies.

Drivers for market development

Technology plays an increasingly important role. “The Uberisation of the insurance sector is an opportunity”, said Doubell Chamberlain, Managing Director of the Cenfri research organisation in his keynote presentation. In the same way that Uber has revolutionised the taxi industry, a new application could, for example,  allow access to rated loss adjusters where they are required, thus reducing costs. Drones and satellites improve data availability and quality, mobile payments allow prompt payouts, even in remote areas. Insurance still matters as a risk management tool for millions, but insurers must nevertheless continue to make themselves relevant. Compared to other financial services sectors, the insurance sector appears to be slow in implementing the relevant technology and other business models for increasing penetration into the low-income market segments.

With millions of people left without access to microinsurance, the question as to who will drive market development remained at the centre of the discussions during the conference. Despite the growing importance of technology in particular and of distribution through mobile network operators (MNOs), the majority of the participants agreed that insurers will remain more important as drivers of market development than the distribution channels. A strong majority at the event was of the opinion that MNOs will still not be the main distributors for insurance in Kenya in five years. Representatives from the insurance industry raised concerns about a possible attempt by the MNOs to monopolise distribution channels. In terms of customer value, the participants agreed that the insurers and distribution channels play an equally important role in ensuring value for the client as regulators or donor organisations.

The way forward
The majority of the speakers and participants were of the opinion that microinsurance is likely to grow rapidly in the next five years. However, the pre-requisites for this are as follows:

  • Visionary leadership and insurance company shareholders who embrace the long-term perspective of inclusive insurance.
  • Strategic investments in consumer education to improve awareness levels and insurance culture.
  • A changing regulatory landscape with regulators and governments investing in the creation of an environment for microinsurance.
  • Increased adoption of innovations in product design and distribution beyond MNOs.
  • Strategic investments in client value; improving trust and delivering the promise of timely insurance. 
  • Continuous investments in knowledge and learning platforms on challenges and successes in microinsurance. Regional conferences such as the Mombasa conference must continue.
  • Persistence; failure must be the stepping stone for success. Insurers entering into the microinsurance sector must constantly learn from failures and always work towards improving product offerings to provide superior value to low-income consumers.

Munich Re Foundation will take up this role and continue to support the efforts at developing microinsurance markets. Together with its partners, it will organise further Learning Sessions in East Africa in 2017 to facilitate the exchange of knowledge and experience.

Authors: Dirk Reinhard, Vice Chairman, Munich Re Foundation, Germany; Lemmy Manje, Consultant, Zambia

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About the event
The Microinsurance Learning Sessions Kenya took place in Diani/Mombasa from 6 to 7 April 2016. Some 80 insurance experts – mainly from Africa – attended the event under the key topic of “Microinsurance business models for Africa”. 

The Microinsurance Learning Sessions were hosted by Munich Re Foundation and the ILO’s Impact Insurance Facility in collaboration with AB consultants. The conference has also been supported by the Insurance Regulatory Authority of Kenya (IRA), Association of Kenyan Insurers (AKI), the Center for Financial Regulation and Inclusion (Cenfri), the Microinsurance Network and Africa Re.
 

International Microinsurance Conference

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World Map of Microinsurance

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Microinsurance Compendium

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Learning Sessions Kenya

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