Society

Dwindling trust to hit insurance penetration

insurance (1)
scottbellows

Summary

  • Two weeks ago, the Insurance Regulatory Authority (IRA) bemoaned that insurance penetration in Kenya declined in 2019 to its lowest point in 15 years at a paltry 2.34 percent, down from its 3.44 percent peak in 2013.
  • This author predicts a further decline in 2021 and beyond due to diminishing trust in the sector.

PART 2

This week, we continue the journey of examining the trust issues flummoxing the insurance sector.

Two weeks ago, the Insurance Regulatory Authority (IRA) bemoaned that insurance penetration in Kenya declined in 2019 to its lowest point in 15 years at a paltry 2.34 percent, down from its 3.44 percent peak in 2013.

This author predicts a further decline in 2021 and beyond due to diminishing trust in the sector.

Last week in Business Talk, we looked into the first of three pillars of organisational trust, ability, investigating what competency issues harm the sector. Continuing to build off Roger Mayer, James Davis, and David Schoorman’s model of organisational trust, let us delve into the second pillar — benevolence.

PART 1: Insurance trust issues in Kenya

Organisational benevolence means stakeholders perceiving that an entity is well-intentioned, means well and is kind. So, in our insurance sector, it signifies that consumers need to feel that an insurer has their best interests in mind.

They must perceive that the respective company holds goodwill towards them and wishes them good health not from a cost savings perspective but a genuine point of view.

Further, policyholders must not doubt the intention of their insurer to cover them when catastrophes do strike.

But focus groups and surveys show that Kenyan consumers perceive insurance companies as a whole to be unkind, ill-intentioned, and not sure to payout on covers in the event of an adverse shock to their lives.

One hears a plethora of stories in our social groups of vehicle insurers delaying to pay for accidents up to one year, health insurers refusing to cover chronic conditions even though it may be newly diagnosed, or property insurers declining to replace household goods following a theft by questioning whether a police report reflects the truth.

Insurance consumers, therefore, feel like David fighting Goliath in an epic titanic clash to fulfil expectations and secure resiliency after terrible shocks.

Sadly, the botched insurance sector response to the Covid-19 pandemic sunk perceptions of benevolence to new lows. Even large Kenyan companies struggled to negotiate with insurance companies to have Covid-19 included in health coverage for their staff.

Then a compromise emerged of a combined pool of only Sh3 million, Sh4 million or Sh5 million for hundreds of staff. Honestly?

That is the best insurers could have done without being forced by regulators? What about individual policyholders without the counter negotiating power of leverage? They were left abandoned with insurers claiming pandemic illnesses were not a covered medical expense.

Essentially, a health crisis struck the world and our insurers tried to abandon their moral obligations to our health. Consumers realised that insurers were not on their side.

While the universal health coverage model in the United Kingdom saw the nation rally around the National Health Service as no patient was left behind, and the insurance model of the United States saw immediate regulations forcing insurers to pay 100 percent of Covid-19 related illness costs, Kenyans were abandoned.

It took months for our Kenyan health insurers here to be forced by the IRA to include coronavirus as a covered medical expense.

While Kenyan regulators acted faster than other sub-Saharan African nations’ regulators, our consumers were still left in the lurch too long since individual insurers largely did not initially step up, and it decimated benevolence trust perceptions.

Personally, this author knew several Kenyans who purchased health insurance policies in the Dubai market for coverage in East Africa and vowed not to trust Kenyan-based insurers again.

Personally, I was fortunate enough to buy a North American health insurance policy with global cover as a result.

But such attempts to shirk responsibility does not lie with health covers alone.

Millions of Kenyans can remember back to the terrible days of the Westgate terrorist attack in 2013 when, after the violence ceased and the smoke cleared, vehicle insurers declined to cover many of the automobiles destroyed in the attack by claiming obscure clauses that absolved them of responsibility.

Consumers do not want uncertainty. They want a benevolent partner who they know will be there when they have a crisis.

This author knows colleagues who go for lower coverage for the same price from insurers who they know will actually pay out without drama.

As consumers, we hold long memories like elephants. We do not easily forgive benevolence-based violations of our trust in organisations.

Fortunately, the future does not have to be bleak for the industry.

Join Business Talk in the next two weeks for part three about integrity and part four on trust repair in this insurance sector series.

PART 3: Why many Kenya insurers fail the test of integrity

PART 4: How to rebuild trust in Kenya insurance sector

[email protected] or @ScottProfessor