NAIROBI, KENYA: Insurance players in the country are concerned by the slow uptake of insurance products for natural disasters in light of the ongoing floods that have so far claimed 63 lives in the past month alone.
Floods wrecking havoc.
In the last three weeks alone, most parts of the country experienced torrential rains even as the meteorological department warned flash floods in certain areas for the better part of the month.
Majority of business owners and individuals in the country, however, remained uninsured against this natural disaster and remain exposed to risk of losing their personal property and businesses.
“We have received cases of business premises being destroyed and entrepreneurs losing their stock due to water damage from heavy rainfall, a good number have lost out or closed shop as they failed to insure against such risks,” explained Muchemi Ndungu, the chairman of the Association of Insurance Brokers of Kenya.
Mr Muchemi further states that business owners are not the only ones who have suffered losses in the past three months. Several motorists have had their vehicles swept away by the raging floods in different parts of the country.
“We have also had a sizable number of claims from farmers who have had their crops destroyed by the floods,” he says.
The severe weather events accounted for billions of shilling in insured loss, but the amount according to market analysts is still lower than the loss suffered by the many who did not insure. Ndungu contends that the emerging trend only helps demonstrate the low insurance penetration in the country.
Value of insurance
“The severe weather-related events provided a reminder of the value of insurance and the vital role it plays in helping individuals, communities and businesses to recover from the devastating effects of catastrophes. However, large parts of the globe that are prone to weather extremes were not able to rely on financial relief due to low insurance penetration.”
However, the slow uptake of insurance against natural disasters like fires and flood mirrors the trend in the country where growth in the sector has been slow over the years.
Just over three per cent of Kenyans have access to insurance products, with the informal sector having little or no uptake at all.
A general distrust on the part of insurance brokers in the industry coupled with the perception that insurance is expensive, and the fear of not being able to sustain premium payments are some of the factors that have hindered penetration of this vital economic service.
In addition, there has been limited industry knowledge and the limited available offerings, especially products targeting the informal sector that has tended to fuel mistrust and misinformation.
“Awareness of insurance products is mostly on vehicle and health insurance, but a good number of Kenyans are unaware that they can insure against un-foreseen circumstances like drought and floods,” reckons Ndungu.
Ndungu, however, states that the scale of exposure to natural disasters is not as large to warrant economic disasters.
“In most cases, natural disasters in the country are restricted to floods and drought, with the latter affecting the agricultural sector,” argues Ndungu.
He says a country like Japan recently suffered triple disasters — tsunami, earthquake and nuclear instability, with the citizens exposed to substantial losses.
The Insurance Regulatory Authority (IRA), the industry regulator, states that although insurance penetration in the country is low, uptake in Kenya is relatively high compared to other African countries.
The most recent data from the IRA on performance of the industry indicates that its profit are expected to grow by over 60 per cent to stand at Sh11 billion as at 2012 compared to Sh7 billion recorded in 2011.
Investment in the industry during the period of 2012 grew by 24 per cent to stand at Sh235 billion, with assets held by the industry standing at Sh302 billion, a 67 per cent growth compared to 2011 figures.
However, insurance fraud remains a pertinent issue in the industry. “Most of the cases have been recorded in the large medical schemes where culprits are falsifying records,” explained IRA CEO Sammy Makove.
By Frankline Sunday, The Standard
