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Microinsurance remains a hard sell among poor households despite the increasing number of firms offering such products in the local market, a new study shows. Unlike micro-lending – the better-known side of micro finance which has a total asset base of more than 250 billion as of December 2021 – micro insurance has been slow to take off.

An analysis by the Association of Kenya Insurers (AKI) dubbed the state of Microinsurance in Kenya cites various reasons for the slow uptake including price undercutting by insurance firms, low profitability, fraud and sales agents prioritising on products that have higher premiums among others. Other reasons given by the association are intermediaries who don’t have a good grasp of the products and claim procedures.

““For microinsurance to work, we need to partner with a wider variety of institutions including development partners, insuretechs and technology partners, government and other business associations and aggregator groups such as Saccos, churches and others,” said AKI Chief executive Tom Gichuhi.

He noted the fact that microinsurance regulations allow for insurance distributors to be non-insurance players.

Microinsurance provides access to the formal insurance market by creating unique products and distribution systems to address their needs and covers smaller coverage and relatively or proportionally attract smaller benefits.

The AKI survey carried out earlier this year found that the number of microinsurance products in the market had shot to more than 55 compared to 32 in 2015 despite a low insurance penetration rate in the country of below three per cent.

Agriculture, last expense and health microinsurance products rose from two to five, four to six and six to nine respectively.

Data from AKI also highlights the number of micro-insurance underwriters has grown from 11 in 2015 to 18 in 2022, implying growth potential. Microinsurance products have increased both in numbers, and types during the period even though a number of brokers had also lessened.

Available Insurance Regulatory Authority (IRA) data show that the number of registered insurance brokers had dropped from 225 by end of last year to just 204 as of June 30. The regulator had in July last year delisted some 38 insurance brokerage firms for non-compliance including failure to remit premiums on time.

Personal accident

Health insurance, personal accident, and last expense were noted in the AKI report to be the most popular microinsurance products demanded by consumers and that have the potential to grow and cover a wider section of the population – but that is yet to be felt across the insurance segment.

These products include crop insurance and livestock or cattle insurance, which are increasingly sold as index-based insurance, covering theft or fire, death insurance, disability, and natural disasters.

Those targeted by microinsurance include Jua Kali sector, farmers, farm workers and house helps among others.

It followed the 2020 issuance of microinsurance regulations by IRA, requiring microinsurance underwriters to register a separate business away from conventional insurance.

The regulations also clearly define the parameters of a microinsurance product to be not longer than 12 months (renewable), premium should not exceed Sh40 per day and the sum assured should not exceed Sh500,000. According to AKI, there are key barriers that limit the growth of the microinsurance industry whose report found that “some aspects of the regulations are not well comprehended.

Existing underwriters prefer to implement the microinsurance within the preexisting conventional insurance business license.” Further, AKI notes that “It is perceived that the insurance companies should be allowed to innovate products without having to obtain new approvals from the IRA.”

“It is perceived that clients should be notified and no further need to get approval by the IRA – driven by particular needs in the current situation so as not to limit innovation. Perhaps have flexible (bracket features) that allow innovation whilst protecting policy holders,” reads the report in part.