In nearly a year, insurance customers have cashed out more than Sh10 billion in early policy exits in a troubling trend that speaks to the hard economic times and the need for a greater innovation.
Pushed to a corner, policyholders have been opting to take big hits through penalties by withdrawing their pension, life, and investment savings before maturity.
While their exits have little impact on the insurers who recover their expenses at the start of the policy, they put customers at a net loser’s position.
Going forward, there is a need for insurance firms to be more innovative about long-term savings products. With all indicators showing that there won’t be a quick turnaround in the global economic downturn, more customers are likely to follow suit.
Audit and advisory firm Deloitte is warning of this temptation in its outlook for East Africa and the insurers would do well to take heed.
Adopting more flexible policies that allow customers to hop in and out without incurring hefty penalties will be a win-win solution; allowing customers to put their much needed personal use to greater use while ensuring business sustainability.
