The basic function of insurance is to protect individuals, families and businesses against risks like loss of health, life and property. Its basic premise is that risks are a reality, hence the need to prepare better for the financial consequences of unplanned misfortunes. Insurance is about planning for eventualities beyond our control and the consequent financial loss.
However, only three per cent of Kenyans have a life, health or other type of underwriting policy. The low uptake of insurance is mainly attributable to the fact that many either cannot afford it or simply do not know how it works or what its benefits are.
Certain social attitudes also discourage people from seeking financial indemnity products. For instance, some believe buying life insurance is akin to contemplating one’s demise—which is taboo in many African communities.
There is also the general mistrust of insurers due to cases of delayed or unpaid claims and poor customer experience. While many insurers do pay on time and offer excellent service, sporadic cases of malpractice tend to generate considerable negative media publicity, tarnishing the industry’s reputation.
But even for those lucky enough to be insured, they are either over- or under-insured since most underwriting products in the local market are not designed to fit their needs. Besides demystifying insurance through consumer education, therefore, there is also a need to simplify the terms so that people can easily grasp the relevance of insurance and how various products fit into their daily lives.
We also need to develop insurance products that allow customers to select only the items they need and at a price they can comfortably pay. Fortunately, more people now appreciate the value of insurance after the COVID-19 health crisis brought home the realities of unexpected financial calamities arising from illness, death and loss of income.
The upside of the pandemic is that it accelerated the uptake of digital financial services with more consumers shifting to online and mobile channels to access insurance. But as consumers go digital in earnest, data such as on the Ernst & Young Future Consumer Index show in the post-pandemic era a growing number of customers value their experience with a product more than anything else.
The challenge insurers face, therefore, is how to deliver quality, affordable products while innovating experiences that surpass client expectations. Fortunately, innovative technologies enable them to do it. While insurers were initially slow to catch up with the digital transformation of the financial services landscape, digital disruption is now redefining the underwriting space.
Creating social protection through insurance delivered digitally has never been easier with the growing prevalence of artificial intelligence (AI), data analytics and other disruptive technologies that allow insurers to not only automate their processes with unprecedented efficiency but also generate valuable data to better define and respond to fast-evolving customer needs. Enhanced automation through AI, for example, reduces overheads and inefficiencies, and thus costs.
New digital insurance platforms, also known as InsurTech, effectively support the roll out of simpler products delivered at a lower cost to customers anywhere, anytime. Insurers are thus able to reduce premiums (make insurance more affordable) without compromising underwriting standards.
Digital insurance providers provide a transparent platform that allows customers to compare product prices, pay on convenient terms and have claims processed faster by eliminating paperwork. It is now possible to purchase insurance online in a matter of minutes and process claims faster than ever, building greater customer and public trust.
Another major social benefit is in creating new distribution channels targeting the undeserved low-income consumer segments hitherto excluded from the conventional underwriting market. Insurers should leverage InsureTech to deepen insurance penetration by transforming the customer experience with innovative technologies.
Kenyans should take advantage of the latest innovations to buy insurance and protect themselves and their families and businesses from everyday risks which, if not mitigated on time, can lead to financial ruin.