If you visit healthcare facilities in both rural and urban areas, one observation is the proliferation of posters offering financial aid, screaming messages such as “instant credit, loans within 48 hours”. It is by design and not accident that microfinance institutions and other credit companies find customers in hospitals.
Being sick in Kenya is an expensive affair, with most patients being unprotected by health insurance leading to a dependence on fundraising through mechanisms such as loans to offset medical bills.
Patients and their families often still face financial burden even in cases where their medical bills have already been settled. For a casual worker, a day in hospital means a day without a daily wage.
The financial burden that comes with being sick is especially severe if the patient is the sole breadwinner. Efforts by county governments such as Makueni and national government bodies such as the National Hospital Insurance Fund, to lower the cost of insurance cover have made gains in attracting more users of health insurance products.
The Makueni county government cover requires households to pay Sh500 annually whereas the National Hospital Insurance Fund (NHIF) has increased coverage for expensive procedures including treatment abroad. Despite these efforts, health insurance penetration is still low.
Latest data from the Insurance Regulatory Authority (IRA) shows that penetration resides at 2.73 per cent against the global average of 6.28 per cent. One of the biggest challenges in increasing insurance penetration rates, especially at the low end of the market, is that many users often find it difficult to buy a product whose immediate benefits cannot be felt. This is a common phenomenon in many emerging economies. Additionally, many insurance products are not designed to cater to low-income earners.
For example many annual insurance policy premiums are required to be paid upfront, placing significant financial strain on the consumer where income is prioritized for more pressing needs such as school fees and food where small regular payments would be more affordable.
Fortunately, the rapid uptake of mobile phones and mobile wallets across the continent offers a particularly effective channel for the distribution of insurance to underserved consumers in emerging markets making it a win-win model for both insurers and operators alike.
It is a cost effective and accessible channel for enrolment, premium collection, customer servicing, and claims processing. It also offers the insurer access to a large pool of customers, who would otherwise have had no insurance cover, at minimal cost.
Furthermore, telecommunications providers have realized benefits such as reduced migration of users to other networks because the free insurance acts as an incentive for subscribers to continue using their lines.
So effective is this medium for insurance distribution that the GSMA has seen a nine per cent year over year increase in mobile insurance services. Early successes in Africa include Tigo Ghana’s family care insurance product launched in 2010 that resulted in 500,000 registered members within the first 25 months. The product was initially offered as a loyalty or free product that was linked to mobile phone usage.
The government’s plan to widen universal healthcare under the “Big Four Agenda” should potentially consider the merits of the mobile insurance model in achieving scale and impact for bottom of the pyramid consumers.
JEREMY LEACH, Executive director and CEO, Inclusivity Solutions.