Mobile phone platforms key to insurance uptake: Study


Introduction of low-priced insurance products via mobile platforms is the best way to target the mass market, a new report says.

The study commissioned by Prudential Life Assurance says financial inclusion of low-income earners would help break barriers caused by poor perception of insurance products, religious and cultural beliefs, and other hindrances.

Products already on mobile platforms include transfer of funds, payment for goods and services, and sourcing of loans from saccos and banks.

The report, authored by the UK-based Overseas Development Institute, says insurance-client contract terms should be eased to allow low-priced products to take off before regulatory conditions are re-introduced gradually to safeguard pubic funds.

The report says that weak insurance firms — many lacking sufficient capital bases due to losses and a history of irresponsible customer protection — must be restructured or merged to form a strong financial base from which the government could borrow funds.

“An effective regulatory framework is crucial to ensure stable institutions and strong focus on customer protection. This will provide a firm basis for development of the industry by building trustworthy institutions,” says ODI’s lead author Judith Tyson.


The report adds that regulation of the sector should be eased to enable insurance firms introduce innovative products that take advantage of mobile-based cash platforms.

Last Tuesday’s ceremony at Serena Hotel, Nairobi, heard that insurance companies must get out of slumber and take notice of the way banks have embraced phone-based and online payment platforms, recouping business lost to mobile money service providers.

The study asks the government to play a central role in encouraging Kenyans to take up life insurance as this would provide cheap funds for infrastructural development — unlike donor aid or bank loans that are costly and stringent.

“Policy approaches are important in accelerating the development of life insurance markets to gain these benefits and manage the inherent challenges. The government must focus on optimising market structure, ensuring effective regulation and building financial access and literacy,” she said.

The report adds that new rules could liberalise the life insurance market to let in foreign players with vast expertise from their traditional markets, thereby fast tracking uptake of policies.

The 44-paged report titled “Life Insurance Markets in sub-Saharan Africa: Capturing the benefits for economic development”, says that while Kenya enjoys a formidable thirst for life insurance, the market is served mainly by South Africa firms. ‘These companies have expanded regionally into Nigeria, Kenya and Ghana, but with hubs staffed in South Africa that concentrate the employment there,” says the report.

The government could gradually introduce more complex regulation such as risk-based supervision, says the report.