Micro Insurance in Kenya
Micro Insurance is the packaging of insurance for the low-income earners. It factors in their income, needs and the nature of risks they face. It was introduced in Kenya in 2013.
Low Penetration of Micro Insurance
Generally, the penetration of Insurance in Kenya is low and currently stands at 3.1% of the Gross Domestic Product (GDP). This has been attributed to low levels of disposable income, poor saving culture and negative perception towards insurance. Despite also Micro Insurance being introduced in 2013, only 21% of insurers remain active in Kenya today. Out of the premiums earned in 2017, also less than 1% were from micro insurance.
Challenges Impeding Penetration of Micro Insurance
Insurance companies can take advantage of the challenges facing micro insurance in Kenya and convert them to opportunities which will result to an improved customer experience and more people taking it up.

1. Lack of awareness

Lack of awareness by insurance customers is a major challenge facing micro insurance. Many are aware about insurance, in general but they don’t have enough information that would help them make a purchase decision. Insurance underwriters need to invest in educating and training their consumers to increase the uptake of micro insurance products.

2. Product bundling

The insurance companies offering micro insurance products ought to understand the risks and needs of a group that is already vulnerable so that they can provide more solutions and “relevant products”.

3. Use of Data to enhance Customer Experience

Long time ago, getting data was a challenge, for many companies but now many of them have an organized and systematic way of collecting useful data. Insurance companies offering micro insurance products should use the data in their possession and analyze it so that they can understand their customers better and even provide more personalized services. This information should also be used to inform decisions.

4. Distribution

The challenge of distribution is one of the biggest issues facing insurance companies and even customers. And a key success factor for micro insurance is delivering the right product in a cost-effective manner that allows the consumers to access information and enroll easily. Many underwriters treat micro insurance products like conventional products therefore the current distribution infrastructure is not conveniently suited to drive the penetration of micro insurance.
The targeted population has limited information and they do not feel the insurance products target them. With an estimated 88 per cent penetration rate, mobile money in Kenya can be a significant driver of micro–insurance penetration. The potential target market for micro insurance is in excess of 38 million people who are registered as mobile users; the over 50,000 community-based organizations registered in Kenya. The phenomenal success of mobile money products such as M-Pesa and M-Shwari points at the huge untapped market for financial products targeting low-income households and businesses.
There have been attempts in the past to leverage mobile money to introduce micro-insurance products into the Kenyan market, although these have not always succeeded. However, use of alternative distribution channels through partnerships is the key to solving the distribution challenge. Collaboration between mobile network operators (MNOs) and underwriters is inevitable. Managing these relationships is also key, especially in agreeing who really owns the customers.
Conclusion
In this digital era, there is a great potential to grow micro insurance in Kenya with the right mix of delivery channels and innovative solutions. Instead of relying on harambees to clear hospital bills, raise school fees among others, micro insurance products that are accessible by everyone would be a better and more convenient way of dealing with such challenges. Micro insurance will also improve the financial and social well-being of individuals and households, thus boosting the overall economic prosperity of the country.
Article by Nelly Tuluba
Image: Courtesy