Pension firm forms brokerage unit with eye on county staff

Pension fund manager CPF Financial Services has started offering insurance services after opening a brokerage subsidiary targeting county workers.

The pensions firm, with Sh27 billion worth of assets under management, will run Laser Insurance Brokers, alongside its main pensions business.

CPF chief executive officer Hosea Kili said in an interview that the firm is still engaged in negotiations with individual counties, and will then call a meeting in the middle of the year to firm up agreements on taking up the services.

He said that as a pensions body, CPF generates big business for insurance companies, and that the services they have been getting from some of the insurance brokers hired to handle this business have not been sufficient or efficient enough since they do not understand the pensions business.

“We are going into insurance not only as an investment but to also consolidate different financial services to members within the group. We are required by law and our regulations to put up insurance covers for members,” said Mr Kili.

“The money we spend on insurance is huge and we thought that we ought to keep some of it within the company for members benefit— we can keep a big chunk of the premiums within and hence grow the fund through the commissions that would otherwise go to other insurance brokers,” said Mr Kili.

CPF Financial Services was formerly known as the Local Authority Pension Trust (Laptrust). It was established more than 80 years ago, acting as a contributory scheme for employees of the local government.

When searching for underwriters, the firm is planning to concentrate on offering microinsurance products in areas like health, agriculture, investments and employment cover.

Mr Kili said that the health insurance packages will be modelled along the lines of the product offered to teachers by the Teachers Service Commission. It is a pooled cover to be provided to county workers as a group, with the benefits based on the pay packages.

CPF’s health cover will not be a substitute for the National Health Insurance Fund (NHIF) for county workers, but will be treated as a complementary product.

For the agriculture insurance, the product would only work if there are sufficient numbers that would allow for relatively low premiums to avoid eating into the margins of farm profits, which are sometimes suppressed by low commodity prices.

“We are also looking ahead to the derivatives market for agriculture commodities where there will be need for insurance for both the seller (farmer) and the buyer of the commodities, in order to cover for any eventuality such as crop failure,” added Mr Kili.

CPF in October 2014 introduced a mobile-based pension plan for people with monthly incomes of less than Sh10,000, becoming the second low-income segment product in the market after the Mbao pension plan by the industry regulator, the Retirement Benefits Authority (RBA).

The service dubbed M-Pension allows users to make daily contributions of between Sh50 and Sh300. The product targets workers in the informal sector and the self-employed.

The two groups are usually left out by most formal pension schemes despite making up the majority of the labour market.