Understanding the Uninsured Market Executive Summary

Transcription

Understanding the
Uninsured Market
Executive Summary
For: Association of Kenya Insurers
May, 2008
1
Introduction
2
Introduction
 The Association of Kenya Insurers (AKI)
sought to carry out a targeted survey to
understand the uninsured market unique
needs and establish the best way in which
this market could be covered by insurance.
 The Association was concerned with low
market penetration of insurance in Kenya
and the poor public perception of insurance
by the general public.
3
Introduction
 The research will guide in the proper
development of strategies in order to
improve the penetration of insurance in
Kenya from the current 2.5% of the GDP.
4
Research Objectives
 The survey sought to:
 Establish the extent of the uninsured market in
Kenya in terms of size
 Identify the main reasons for the lack of
insurance cover in the uninsured market
segment.
 Establish the main challenges of providing
insurance to the uninsured population.
 Find out how the uninsured segment perceived
the insurance industry.
5
Research Objectives
 Establish the obstacles that intermediaries
(Agents and Brokers) face in trying to sell
insurance products to the uninsured population.
 Establish strategies that the insurance industry
could adopt to capture the uninsured market.
 Understand the flow of incomes in that category
 Understanding their needs in terms of insurance
protection
 Establish whether they were willing to buy
insurance protection
 Establish how much they would be willing to pay
for this
6
Research Methodology
Approach
Qualitative
Quantitative
Technique
Focus Groups and Indepth interviews
Face to face interviews
Instruments
Discussion & In-depth
guide
Semi-structured
questionnaires
Sample Size
3 focus groups
20 in-depth interviews
94 brokers and agents
1010,current lapsed,
and non insured
Target
Respondents
Male and female
Scope:National
Age
18 years and above
Social Class
BC1C2
Desk review was conducted to gather data
from secondary
7
sources. Field work was conducted in October 2007.
Summary of Findings
8
Profile of respondents
50%
Non User
18%
Lapsed user
32%
Current User
9%
Married without children
46%
Married with children
45%
%
Single
1%
Over 60 years
4%
51-60 years
14%
41-50 years
33%
31-40 years
43%
20-30 years
5%
Below 20 years
0%
10%
20%
30%
9
40%
50%
60%
Profile of respondents
Rural
30%
Urban
%
70%
Female
45%
Male
55%
0%
10%
20%
30%
40%
50%
10
60%
70%
80%
Extent of Uninsured Market
 The low income and informal sector market
has little access to formal financial services
for the management of risks.
 They engage in various types of risk pooling
and informal insurance schemes to mitigate
risks.
 There were only 367,059 individual life
policies at the end of 2006 in a working
population of 8.74 million (about
4%
coverage).
11
Total Rewarded employment
2005
000’s
2006
000’s
1807.8
1858.4
66.80
67.2
Informal sector
6396.9
6814.9
Total
8,271.5
8,740.5
Modern Establishment-Urban and Rural Areas
Waged Employees
Self-employed and unpaid family workers
Source: Economic Survey 2007
This implies that there are about 8.74
million people who can still be reached
through insurance with the right
products.
12
Reasons for Lack of
Insurance
 Lack of awareness on products
 Low income levels and unstructured flows of
income for the informal sector
 Low rate of returns for life policies
 Long claim settlement procedures
 Lack of trust in the insurance industry
 Little advertising/public education
 Perceived ‘expensive premiums’
 Complexity of insurance documents e.g.
proposal forms and policy documents
13
Willingness to buy
Insurance
 Urban dwellers are generally more willing to
buy insurance compared to rural dwellers.
 Life and health insurance products are most
preferred amongst those who are willing to
buy insurance.
 Most lapsed policy holders were not willing
to buy insurance again
14
Willingness to buy
Insurance
 However, current users of insurance were
willing to buy other insurance policies after
the maturity or expiry of their current
policies.
There is high willingness to buy
insurance covers, thus the industry
needs to provide more information and
develop innovative products to suit the
target markets
15
Preferred mode of buying
insurance
 Majority of respondents interviewed prefer
buying
insurance
from
intermediaries
meaning that they still play a big role in
marketing insurance.
 However, most rural dwellers prefer buying
their policies directly from insurance
companies.
“Some of the brokers are con men, I would rather deal
directly with the company”
16
Income Levels
 Generally, income levels were lower among
the rural compared to urban areas
 Most respondents interviewed earned less
than Ksh 20,000 on average
 Insurance companies should endeavour to
accommodate this category of potential
customers by designing suitable insurance
solutions
17
Income Levels
 Most respondents were willing to pay less
than Ksh 500 premiums on life insurance
covers (where most cited preference for a
death benefit)
 Cash premium mode of payment was most
preferred
Insurance companies can utilize cash transfer
options through mobile telephony (Mpesa/Soko
Tele) to increase penetration
18
Awareness
 There is high awareness of insurance in
general among the insurable population but
a
large
proportion
lack
a
proper
understanding of what insurance is and the
impact it may have in their lives.
 Most of the already insured respondents
cited a lack of interest in reading policy
documents especially if a claim does not
occur at all.
19
Awareness of Insurance
Products
Insurance products
Insurance products awareness
10%
Corporate
Public Liability
Domestic package
Travel cover
Mortgage
12%
12%
21%
26%
27%
Burglary
Pension
Fire
51%
52%
53%
Personal Accident
Education scheme
54%
71%
Medical
Motor Insurance
Life insurance
75%
77%
0%
20%
40%
60%
20
80%
100%
Cost of Insurance
 Affordability was a key concern among the
insured, those who have lapsed and the uninsured.
 However, the issue of affordability was
found to be more of a perception than the
reality due lack of communication on the
actual cost of insurance policies and
premiums.
21
Image
 The insurance industry is affected by the
persistent poor public image which has
caused distrust among potential customers.
 Products lack structured branding initiatives
 There is over-reliance on intermediaries who
may sometimes shift their negative image to
the insurance companies they represent and
to the industry as a whole.
22
Attitude Of The Prospective
Customer May Be:
 I don’t know who you
are.
 I don’t know your
organization
organization’s services.
 I don’t know what your
organization stands for
organization’s customers.
organization track
record.
organization’s reputation.
 Now-what was it you
wanted to sell me?
23
Personification
 The industry was personified
as
– A rich old man
– Very conservative
– Drives an old fashioned
Mercedes Benz
– Very mean
– Would be a distant friend
– He goes for lunch at five star
hotels like Hilton and Norfolk
24
Product Structure
 The market is currently flooded with unique
innovations in the financial services sector.
 However, the insurance services are
progressing at a slower pace in terms of new
products, mode of payment or target
markets, thus leading to the perception that
the products are not unique or modern.
 There is very little advertising seen on new
innovations
25
Customer Satisfaction
 Standards of service delivery among many
insurance companies are still low and the
focus on the customer has not yet been
embraced fully in the industry as it has in
the competing financial services.
 Customer
satisfaction
remained low.
therefore
26
has
Differentiation
 There is a low product differentiation where
insurance companies are perceived to be
using products designed for other markets
and applying them to the Kenyan markets
without significant adaptation to the local
environment.
Products need to be focused alongside
their key differentiators to drive appeal
27
Differentiation
 Further, there is inadequate differentiation
between products from different insurance
companies, making it difficult for consumers
to distinguish between competitor offerings
in terms of product features, customer
service, staff competence, channel or
promotion strategy.
28
Branding
 There is less focus on brand development,
management and measurement.
 This lack of focus on building brand
awareness,
perceived
quality,
brand
associations and brand loyalty means that
insurance products in Kenya have a high
commoditization level which leads to low
emotional appeal.
29
Corporate Social
Responsibility (CSR)
 Most insurance companies are not involved in
visible
social
responsibility
programs
implying a low focus on good corporate
citizenship.
 The banking industry is associated with such
events as Stanchart Nairobi Marathon, KCB
Safari Rally, and Barclays Women Walk.
 This has contributed to a generally poor
image of the insurance industry.
30
Information Technology
 The industry has not fully embraced modern
Information and Communication Technology
(ICT) which would enhance the level of
service delivery and support new modes of
payment.
 The banking industry examples include:
 Online banking
 Call center service
 Mobile Phone banking
 E-mail marketing
31
Segmentation
 There is a lack of clear cut targeting
and segmentation in product design
which would ensure the unmet
needs are addressed.
 The other financial service providers
for instance banks have been
appealing to special groups e.g.
 MOVE, Diva account for women by SCB,
Fanikisha for women by Equity bank, Chama
Accounts for investment groups, IFC/GOWE by
K-Rep and CFC and KCB Grace loans.
32
Obstacles faced by
Intermediaries
 Hostility from customers due to low awareness
 The negative image of the insurance industry
 The level of training of agents is below optimum
levels-Many agents have neither the experience
nor the professional expertise in the business
 Lack of advertising
 Poor segmentation and targeting thus they
apply mass marketing
 Claim settlement procedures
 Lack of enthusiasm
33
Challenges of
providing insurance to
the uninsured
34
Cost of Premiums
 This is a critical ingredient in any product
and is also linked to the willingness to pay.
Lack of information on insurance
 Most potential and current customers lack
information on the existing insurance covers,
the types of risks to be insured and the
processes of lodging a claim
35
Competition with other investments
 Insurance products are often seen as
providing low returns hence resulting in
preference for other investments like
cooperatives, listed shares, land, merry go
rounds etc.
Premium collection process
 The premium collection process is an
important consideration in covering the
uninsured market especially those in the
informal sector.
36
Claim Payments
 Customers lacked understanding on the
procedure of lodging a claim, sales people
hardly educate them on this part
Marketing
 Lack of strategic product development,
segmentation and targeting, advertising and
structured channels of distribution
37
Strategies to capture
the Uninsured Market
38
Cost Cutting Measures
 Lowering administrative costs can make
insurance cover affordable.
 Some of the cost cutting measures include
replacing the current intermediaries with:
 Retailers in kiosks-limited only to very simple
products like funeral cover
 Use of mobile telephone cash transfer options
in payment of premiums
 Affinity groups partnerships- partnering with
Community based organization and local NGOs
to offer insurance to the poor
39
Awareness Measures
 Can be achieved by raising awareness,
cultivating an understanding of insurance
and activating the market.
Government intervention
 The industry should continuously lobby the
government for favourable treatment in
providing tax incentives and putting in place
policies that improve the economy and result
in higher disposable incomes.
40
Recommendations
41
1. Increase Awareness on
Insurance
Testimonial advertising
 Real beneficiaries of insurance need to be
used in electronic and print media
advertising so as to present the benefits of
insurance.
 Publish testimonial stories in magazines or
TV
documentaries
focusing
on
key
differentiators e.g. payment for a stolen car
or payment of hospital bills following an
accident.
42
Increase Awareness on
Insurance
Information Advertising
 The benefits of insurance as a risk
management and savings tool have to be
emphasised in the media.
Reinforcement Advertising
 This can be done in print and electronic
media to assure customers who have bought
insurance that they made the right decision
so as to reduce on lapses.
43
Increase Awareness on
Insurance
Participate in Trade Fares
 Insurance companies can increase their
visibility by participating in trade fares
countrywide
 AKI can enhance the insurance open day to
take a longer period and cover other towns
apart from Nairobi.
44
2. Viable and Cost Effective
Distribution Channels
Increase Branch network
 Can be done by opening branches in viable
locations in major urban and rural towns.
Use Mobile Branches
 Insurance services can be taken to the
people by having a mobile office on a weekly
basis to offer all services to customers and
reduce their expense on time and travel to
headquarters.
45
Viable and Cost Effective
Partnerships
with
Micro
finance
institutions/NGO
 Insurance companies can partner with
institutions that have been successful in
providing financial services to low income
earners.
46
Partnerships with Large supermarkets
 Companies can take advantage of the large
customer base in supermarkets to set up
kiosks to reach the potential customers.
 Insurance companies can also offer discounts
to customers who purchase products through
the supermarket e.g. discounted rates on
domestic package insurance to customers
who purchase electronics or furniture.
47
Bancassurance
 Can be achieved through a distribution
alliance between an insurance company and
a bank. Banks have the advantage of a large
customer base and better reputation than
insurers.
Internet
 Simplification of products and posting
information on company websites can result
in wider reach
48
Direct Marketing
 Can be done through Direct mail,
telemarketing through call centres and
targeted emails.
Salaried Company officers
 Can be employed to sell insurance directly
for the customers who prefer dealing with
the company directly.
49
3. Poor Public Image
 The industry should through enhanced public
relations and CSR activities endear itself to
the publics
 Individual companies can improve their
image by offering quality services to
customers and advertising
 AKI can enhance its public image by
enforcing a code of conduct that punishes
errant members who dent the image of the
entire industry.
50
4. Affordable Premiums
 Insurance companies can reduce the cost of
insurance for customers through use of
modern ICT and working with customers to
reduce risks or exposure.
 Companies need to consider accepting
seasonal incomes (tea /coffee bonus) and
accommodate irregular premium payments.
51
Affordable Premiums
 Customers should be allowed to pay
premiums in installments and be assisted in
premium
financing
with
banks
and
microfinance institutions.
 The insurance industry should partner with
mobile phone companies so as to facilitate
strategies of premium payments using their
money transfer options (MPESA/SOKO TELE)
52
5. Uniqueness of Insurance
 AKI must bring out the uniqueness of
insurance as a tool of risk management so as
to deal with the challenges of competing
products
 This could be achieved through intensive
public education, consistent advertising and
product innovations
 Need to repackage most of the products by
focusing beyond functional benefits through
strategic branding initiatives to create
emotional and self expressive benefits
53
6. Enhanced Service
Delivery
 The AKI should consider setting minimum
service delivery standards for its members.
 Examples:
 Policy documents to be dispatched within two
weeks
 Fully documented and accepted claims to be
paid within three weeks which can be
achieved through flexible documentation
requirements.
 All correspondence to be responded to within
five working days.
54
7. Product
Innovations/Design
 Insurance
companies
should
establish
customer needs through market research in
design of products.
 The industry should design different products
to cover the diversity in customers.
 Products to cover the uninsured market
segment e.g. four year savings product for
undergraduate students; funeral cover; crops
insurance, wedding etc
55
8. Intermediaries
 AKI member companies should enhance the
image of intermediaries by strictly upholding
professionalism
 The industry can sponsor consistent training
programs for agents and brokers to enhance
their effectiveness.
 Improve remuneration
 AKI and individual companies should support
agents and brokers in targeting approaches
56
9. Lobbying Government
 The AKI should lobby the Insurance Regulatory
Authority (IRA) to facilitate insurance literacy
education the same way that RBA does for
pensions.
 AKI needs to lobby the government to provide
tax incentives to companies offering insurance
to the low income segment.
57
10. Research and
Development
 The insurance industry should adopt
continuous research and development so as to
remain relevant to the consumer.
58
12. Branding
 Branding in the insurance industry is still at a
low level compared to other financial services
like banking.
 Insurance Companies should support their
brands so as to enhance competitive
advantage.
59
14. Enhanced Information and
Communication Technology
(ICT)
 Insurance companies should take advantage of
enhanced ICT services to improve on product
offerings and service delivery.
60
15. Investment Clubs
 Insurance companies should develop products
targeted at the fast growing investment clubs.
 The number of clubs has been on the rise and
they have insurance needs which can be
addressed using group approach e.g. Group
Life for Chamas.
61
Lessons From Equity Bank
 Villagers in remote locations have no access to
formal sector services.
 The risks to the poor people’s savings under
traditional options, e.g. merry go-rounds, are
very high.
 Commercial banks do not reach far down and
the poor remain unbanked.
 Open access saving systems are liquid and allow
the poor to respond to crisis risks as they occur.
 New technology lowers the cost of service
delivery, increases access and convenience for
the customer, and allows for greater
customization of products to fit the user’s
needs.
62
Lessons From Equity Bank
 The poor look for some form of system to provide them
with the security and accessibility necessary to save.
 Poor people need and will pay for financial services.
 There is a huge untapped market among low income
earners in Kenya.
 Poor people do not need loans all the time but they need
savings all the time. Open Access mobile savings services
necessitate highly flexible systems capable of dealing
with numerous diverse transactions
 There is a clear preference among the poor for voluntary
open access savings.
63
Lessons From Micro Insurance
Product Design in Uganda
 The insurance sellers should be well informed
about the insurance products
 The design of micro insurance products should be
simple and clear
 Written material to provides product information
to clients should be available
 The income and expenditure seasonality trends of
the community should be understood for
designing premium schedules
 Client needs and requirements should be borne in
mind
64
Lessons From Micro Insurance
Product Design in India
 Efficiency depends less on the delivery model than on
the simplicity of the product.
 Simple products work best because they are easier to
administer and easier for clients to understand.
 The target market is heterogeneous, so it is wise to
offer a couple of different product options as long as
they do not overly complicate the marketing
message.
 Without actuarial calculations, premiums are likely to
be set too high—which means that clients are getting
poor value for money—or too low, which can place
the entire scheme in jeopardy.
65
SWOT Analysis
Strengths
•Life insurance
•Large base of intermediaries
•Financial stability of the main
players
•Professional personnel
•Regulatory authority
•Tax benefits for life insurance
•Compulsory insurance e.g.
Third party for Motor
Weaknesses
•Negative image
•Low levels of training of
intermediaries
•Low level of awareness
•Claims settlement
•Low product innovations (NPD)
•Poor ICT infrastructure
• Service delivery
•Selective coverage (Exclusions)
•Complacency
•Distribution network
•Perceived as conservative
66
SWOT Analysis
Opportunities
•Growth of economy
•Micro insurance
•Embrace advanced IT
infrastructure
•Create awareness
•Improve service delivery
•Targeted product
development
(segmentation)
•Target informal sector
•Advertising and CSR
•Increased mode of
payment
Threats
•Competition from Banks and
other financial service
providers
•Stock market and other
developing groups e.g. merry
go rounds and investment
groups
•Political instability
•Increasing crime rates
•Increased spend on airtime
and entertainment
•Traditional and religious
beliefs
67
Thank you
68

Understanding the Uninsured Market Executive Summary

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