Long-term or life insurance covers, specifically term assurance covers, are probably the most misunderstood concepts in the Kenyan financial and insurance system. If you ever hear someone refer to an insurer as a fraud or scam, chances are high that they had a long-term insurance cover and they can’t explain it. The problem is not even the products available in the market, it is how people rarely care to know about them despite being around for ages.
Long-term or life insurance is a type of insurance policy that provides coverage over an extended period, could be as low as 5 years and as high as 30 years, or in the case of whole life covers, paying premium throughout one’s life. Unlike other types of insurance policies that provide coverage for a specific event, such as motor, domestic, livestock or even professional indemnity,
long-term insurance is designed to protect against the risk of future events that may have a significant financial impact on the assured while also providing an element of investment through long-term savings and capital growth. While many people view long-term insurance as away to protect their financial future against specific risks, it is actually a two-bird killer, providing both protection and savings benefits.
The concept of protection in long-term insurance varies from one product to the next and could be as wide as the assured wishes it to be. As we age, the risk of illnesses and other health-related issues increases, not to mention risks like accidents that could be fatal or disability inducing. Protecting oneself and loved ones from the financial burden that comes with events such as death, temporary or permanent disability and critical illness, which can be costly and financially devastating if not covered adequately, should be a priority for any adult Kenyan.
The savings benefits of long-term insurance are particularly attractive for people who are looking for a reliable way to save for their retirement like in cases with personal retirement or pension plans that have the option for a life cover. As the cost of living continues to rise, it is becoming increasingly difficult for people to save enough money to support themselves during foreseen retirement. Long-term insurance provides a reliable way to save for retirement, ensuring that you have the financial resources you need to enjoy your golden years through capital availability.
So why aren’t long-term or life insurance covers popular in Kenya? The Insurance Regulatory Authority (IRA) estimates the penetration of insurance in Kenya at less than 3 percent despite the fact that 86 percent have heard of insurance and know what it means! In other words, even narcotics have a better penetration in Kenya than life insurance. One of the reasons given for this, is financial constraints amidst the rising cost of living. Makes sense. However, according to data from Statista, Kenyans spend more on restaurants and accommodation, household equipment, alcoholic beverages and narcotics, footwear and even personal grooming, more than they do on health and insurance.
The long-term insurance industry is awash with misinformation and as such, it is placed at the bottom of the list of priorities for an average Kenyan with competing financial needs. It is probably upon schools and colleges to promote the idea of a long-term insurance as a necessity since they already provide the highest source of insurance information (34 percent) to the population. At the same time, insurance agents, who provide the second largest source of insurance information (26 percent) are crucial in promoting long-term insurance as the simple and multi-beneficial alternative to the savings culture encouraged by the government that it is. Insurers probably also need to invest more on digital information and communication channels.
Despite Kenyans spending more on digital information and communication channels, it still ranks low as a source of insurance information. Lower than newspapers and radio.
In general, the idea to protect oneself and loved ones from the financial burden of future events, while also saving for your future should be just as attractive as having a nice shoe, music system, getting high, a vacation or just looking good, if not more attractive. However, it is imperative that one understands the life insurance product or cover they buy into and the terms of the
contract to minimize instances of perception of being shortchanged by the insurer. There are way too many complaints with the regulator, IRA.
By Benard Aloo – Customer Experience Specialist with Madison Life Assurance K. Ltd.