In Summary
  • Many insurance products are not designed to cater for low-income earners with many annual insurance policy premiums paid upfront.
  • Fortunately, the rapid uptake of mobile phones offers a particularly effective channel for the distribution of insurance to underserved consumers.
  • It is a cost-effective and accessible channel for enrolment, premium collection, customer servicing and claims processing.

If you visit healthcare facilities - whether in the villages or towns – you are likely to notice the proliferation of posters offering financial assistance, screaming messages such as “instant credit" or "loans within 48 hours”.

It is by design, not accident, that microfinance institutions and other credit companies find customers in hospitals. Being sick in Kenya is expensive, with many patients unprotected by health insurance. This, in turn, leads to a dependence on fundraising or loans to offset medical bills.

PAID UPFRONT

Efforts by county governments like Makueni and national government institutions 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 only Sh500 annually, whereas NHIF payments are graduated depending on income with Sh500 as the monthly minimum.

Despite these efforts, however, health insurance penetration is still low. The 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.

CUSTOMER POOL

Additionally, many insurance products are not designed to cater for low-income earners. For example, many annual insurance policy premiums are required to be paid upfront.

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. 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.

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.

Data from the Consultative Group to Assist the Poor (CGAP) found that packaging insurance products through voice and data usage can rapidly lead to greater insurance uptake.

FINANCIAL BURDEN

In Kenya, the mobile insurance model has started to take effect with the introduction of products such as Riziki Cover by Equitel from Finserve Africa.

The government’s plan to widen universal healthcare under the “Big Four Agenda” should potentially consider the merits of the mobile insurance model.

For Kenya, mobile insurance is still a relatively new concept. However, it holds great promise as a mechanism for addressing the financial inclusion gap and reducing the financial burden on consumers who are most vulnerable.

Jeremy Leach is Executive Director and CEO, Inclusivity Solutions. jeremy@inclusivitysolutions.com