Kenyan insurance firms are eyeing short-term insurance products of below 12 months to appease the needs of the young population as losses pile and penetration tumbles.
Association of Kenya Insurers (AKI) chief executive Tom Gichuhi says the market is increasingly tilting towards a population that wants insurance that is affordable, flexible and covering as few as two months.
“If we keep on insisting that our products must be annual and we are not able to come up with short-term covers that are reasonably priced, we will one wake up as dinosaurs,” said Mr Gichuhi in Nairobi.
Speaking in an industry event convened by ZEP-Re and CIO East Africa, Mr Gichuhi said the market should deepen collaborations with actuaries to help in pricing of innovative covers.
Insurance penetration has dipped to 2.43 percent, the lowest in 15 years while combined profit for the 54 insurers has shrunk to Sh3.54 billion — the lowest in 12 years. This is despite the rising insurable risks in the economy.
Across the continent, South Africa has the highest penetration at 17 percent of GDP, followed by Namibia at a distant 6.7 percent. Kenya’s insurance penetration, though low, however remains the best in East Africa.
The length of the covers has made it difficult for many young people to come on board, according to AIG Kenya managing director Catherine Igathe who added that the average age of the industry’s customers is 40 years.
Ms Igathe said while the old people may want to buy houses and motor vehicle insurance, many youth want to insure gadgets such as phones and laptops.
“Others are asking for motor vehicle covers for Friday evening to Sunday evening. They say the rest of the days don’t come with high risk because they are fully serving their employer and the car is parked at home,” she added.
Ordinarily, a vehicle worth Sh5 million charged at industry’s average rate of four per cent will for instance require Sh200,000 to be paid upfront before the cover sets in.