Disruptors hold key to insurance industry growth

Traditionally, insurance is a hard sell in Kenya where people rely more on traditional social networks and support systems like chamas and welfares rather than take up formal insurance.

In Kenya and in Africa in general, insurance distribution has over the years relied predominantly on insurance sales agents and brokers.

The main advantage of these channels is that they have deep expertise and knowledge of insurance products and how to sell them. However, these distribution channels are geographically limited to the cities and are expensive.

However, overreliance on these traditional distribution channels and lack of innovation in this era of digitisation is partly to blame for the low insurance penetration in Kenya and the continent.

Whereas it is a fact that the traditional networks are still the leading players in terms of insurance distribution in Kenya, it is also important to note that insurance companies have been struggling to expand their customer base through these channels.

The future of the traditional distribution network largely depends to a large extent on the capacity to integrate new technologies to reach a broader customer base and reduce its running costs.

To augment the traditional distribution channels, insuretech companies and tech startups are introducing websites that sell or promote a wide range of insurance product.

These portals, which promise savings by providing the consumers a platform to compare not only price but benefits from different insurance companies are putting pressure on insurance agents and brokers.

With an increasingly demanding customer who is looking for convenience and efficiency, anyone looking to distribute insurance effectively must think Mobile phone and Internet.

The traditional insurance sales agent is ill equipped to take advantage of emerging technology as they view it as something that will finally render them jobless. However they should look at it as an opportunity to be more effective and efficient in meeting their customer’s needs.

I have been in the insurance industry for over eight years. Whenever I meet insurance sales agents, I normally ask them the difference between the insurance agent of 30 years ago and the insurance agent of today.

They tell me that, the customer is more knowledgeable about insurance and therefore it’s much easier to sell today as an agent.

But why is insurance penetration still below three per cent? Kenya’s current population is 48 million, and about 80 per cent of Kenya’s population is below 35 years. To a very large extent, Kenya’s youth — defined as individuals between the ages of 18 and 35 — will determine the shape of the country’s future.

Interestingly the insurers are busy undercutting each other in terms of prices and therefore making underwriting losses or very low profits instead of focusing on this huge population of young, impatient, tech savvy and vibrant young people.

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This population may not have a lot of disposable income, but they are upward mobile and the high net worth clients of tomorrow.

The new entrants in the market who can see the opportunities, and have the energy and passion will capture this population and grow with them.

They will focus on friendly, flexible and cost effective distribution channels and completely disrupt the market. How can an insurance company capture this emerging market?

It is about time the insurance companies go to the young people, work with them to understand them, become like them to develop products and processes that speak to them.

Eunice Maina is managing partner, Bismart, a digital insurance aggregator.