1. BACK GROUND
The Association has in the past commissioned various studies as part of its core mandate of promoting the common interest of members. It carried out a research in 2003 to analyze the life insurance market and come up with ways of increasing market penetration. The survey findings formed the basis of developing various public education campaigns.
The Association of Kenya Insurers (AKI) sought to carry out a targeted survey to determine strategies insurers can adopt in order to increase the coverage of group life, retirement benefits (pensions) and annuities in Kenya. The main focus was employers who are the main purchasers of group life and retirement benefits business. The study also targeted individuals who are eligible to purchase individual pension plans (IPPs) and retirement annuities. The study targeted Kenyan male and female adults aged 18 ¡V 65 years in the ABC1C2 social class.
2. RESEARCH OBJECTIVES
This study sought to address the following research objectives;
a) Establish the extent of the coverage of group life and RBS in Kenya.
b) Establish the level of awareness on these products.
c) Identify the main reasons for low coverage.
d) Establish the main challenges of providing group life and RBS to eligible members.
e) Establish the obstacles of marketing these products.
f) Establish strategies that the insurance industry can adopt to increase coverage.
3. PRIMARY RESEARCH FINDINGS
3.1 Group Life
Group Life Concerns
- Medical examinations
- Lack of clear understanding on how it works.
- Terminated on changing of jobs or retirement
- Benefits based on salaries only
Why low penetration
- Awareness
- Legislation
- Lack of incentives
- Rigidity in the products
- Perceived as old fashioned
- Limited benefits
- Culture
- Limited Scope of coverage
- Marketing: Product packaging; branding; promotion
There is need for product repackaging to suit the fast changing needs of current consumer and proactive marketing strategies.
Challenges faced by the providers - Group Life
- Consumer education
- Taxation-employers are not entitled to any incentives
- Product packaging; the product is perceived traditional by most
- Undercutting/cut throat competition
- Benefits are not unique anymore
- Broker-controlled
- Lack of information sharing among underwriters on scheme experience
Strategies required to grow coverage - Group Life
- Proper Pricing
- Consumer education
- Pro -active Marketing
- Branding
- Product simplification
3.2 Retirement Benefits Business (Pensions)
Challenges faced by the Providers - RBS
- Cost of running schemes is very high
- High Turnover in Boards of trustees
- Taxation- need to give attractive tax incentives to employers
- Regulation
- Adequacy of benefits
- Tapping the informal sector
- Consumer education
Strategies required to increase coverage of Pensions Business
- Reduce cost of scheme management
- Public Education
- Taxation
- Product diversification
- Increase the benefits offered by the pension schemes
- Legislation
3.3 Annuities
Perception about Annuities
- It helps to provide retirees with a regular income
- It is a safe mode of investing
- They are tax free
- Low returns
- Requires a lump sum to begin with
- The product is outdated
- Not actively marketed
Challenges faced by the Providers - Annuities
- Awareness
- Consumer education
- Rate of returns
- Very old fashioned, where the annuity product being sold was developed many years ago
- The annuity rates should be reflective of the changes in the economy
Strategies required to increase coverage - Annuities
- Awareness
- Modify the annuity rates
- Diversify the product; create attractive packages for instance targeting the pensioners every year
- Marketing: Branding and targeting
4. RECOMMENDATIONS
The following are the recommendations on the three products covered by the research
4.1Annuities
- Target younger and older people and create products to suit them
- Encourage more insurance companies to offer the products hence increase exposures
- Offer annuities to corporate clients as a pension
- Market annuities as a regular income product
- Provide tax incentives for purchase of annuities
- Increase public awareness on annuities e.g. what RBA has done on pensions
- AKI to create awareness and companies to promote individual products
- Branding
- Government intervention - develop instruments to help the product ride on e.g. long term bonds
- Enhance research and development
- There is need to offer some supplementary benefits
- Explore alternative distribution channels e.g. Banc assurance, Money transfer services (M-PESA /ZAP)
- Enhance technical expertise in the industry
- Improve the annuity product to create flexibility
4.2 Group Life
- Differentiate Group Life from individual life/ Brand group life
- AKI to set minimum rates but avoid monopolistic practices
- Enhance information sharing
- lobby for tax incentives (e.g. provide tax incentives to employers who provide group life)
- Consumer education
- Lobby for review of the tender system- (tender system does not allow flexibility of the product)
- AKI and reinsurers to put safeguards - listed risks should be carefully rated
- Enhance image of the industry
- Discourage price Undercutting/ Enhance ethical practice and professionalism in the industry / regulation of the industry / corporate governance
- Focus on the uninsured market
- Upgrade technical expertise - continuous training of sales team etc
- Strategic alliances
- Simplify communication
- Product improvement e.g. more riders
- Free cover limit - use as underwriting rather than marketing tool
- AKI to develop general guidelines on business acquisition
4.3 Pensions
- Lobby pension to be compulsory
- Lobby for a level playing ground through a single regulator
- Introduce pension to the informal sector
- Increase distribution channels
- Look for ways of reducing Cost of scheme administration
- Industry should support the locking in of pensions
- Tax incentives
- Marketing / Product packaging
- Consumer education
- Enabling Legislation
