CEOs - Who Is The Real Competition For The Insurance Business In Kenya?

When we shun insurance services en masse, what alternatives do we embrace instead? And why are we doing that? Let me also ask, does the industry really have competitors or frenemies? Those are the questions that our insurance industry must urgently attend to? Numbers and facts don't lie and these five below tell us that something is terribly wrong.

1. Insurance penetration in Kenya has never grown beyond 3% of both GDP and the population. As a rule of thumb, meaningful change truly happens in any kind of situation once the 5% mark is breached. That is when you become a big brother and not the poorer cousin. Looks can be deceiving though, because the tangible benefits that manifest in the lifestyles of the few industry honchos, make many to think that everyone else in it is that moneyed too.

2. There is still more art than science prevalent in the industry. The science is meant to be in the principles of insurance and the actuarial models that aid in the correct pricing of risks but the art increasingly carries the day in the form of undercutting. This only serves to split the cake instead of growing it beyond the 3% penetration levels. Could it be that this is a science-dependent industry that has accommodated too many artists within its ranks? Yes! This is a clear case of a hospital where the doctors are the patients while the actual patients are having a field day experimenting with all manner of drugs and tools as they try to treat the doctors. Having too many artists is nature's way of filling the vacuum that it abhors in the absence of the few scientists who have never been given a true chance to thrive.

The customers ordered for the science but the industry delivered the art. Is science proving to us that a crowded field deprives the players of the positive artistic space necessary for goal scoring? Maybe yes! Some social distancing is needed here like yesterday.

3. That, 85% of Kenyans know more about the Building Bridges Initiative - BBI than the efforts around Building Bigger Insurers. The political BBI is relatively new compared to the insurance concept that has been around for a century.

4. That, in the digital era, astonishingly, the ordinary man on the streets is more likely to buy a newspaper than take up insurance cover for the same amount of money, yet this paper will eventually end up wrapping the meat at your local butchery. And it is not for lack of the opportunity for insurance education. The industry has a fully-fledged college for that purpose. Ironically, there is no school that trains anyone to sell newspapers, yet it is winning in this share-of-wallet war, hands down.

5. All other non-insurance products and services in the economy take away any spare money that would have otherwise gone to paying premiums. Kenya generally has a despicable pricing strategy on all products in the market. We now know of this as we are increasingly becoming a knowledge-based economy. The wider problem for insurance companies is about how nearly everything else that drives or deprives them of growth, is in the hands of ruthless and exploitative artists. When these external artists are raising the cost of the insurance ingredients, the internal artists are undercutting each other out of the market. Now is the time to cure this topsy-turvy ecosystem through active participation.

We can go on and on but it won't change the facts on the slow growth rates. From an insurer's point of view, significant changes have happened in the industry, but they have not been felt in the economy in the manner that they should have. The sum totals of all the good deeds in the industry have not yet led to the sector's highly anticipated monumental rise to its rightful place, and therefore the industry still begs loudly for the realisation of its full potential. It is estimated that a 7% penetration level is attainable.

The additional science found in risk-based supervision will go along way in righting the artistic wrongs but sadly, that is not enough. Mindset-based supervision needs to also kick in.

The country has thrown at the industry a lifeline through both clear incentives and government deficiencies. For instance, for as long as the public health system is weak, private medical insurance should continue to thrive. Some science is needed to grow the numbers here as there is still a huge gap to be filled.

Further afield, the Telco sector grew out of the deficiencies of the defunct Kenya Posts and Telecommunications Corporation. An earlier myth of just 500 thousand handsets being sold in 10 years was debunked within 6 months of Safaricom going live about two decades ago. At that time, the Safaricom leadership was on record for having thought that Kenyans had peculiar calling habits, but interestingly, it was the other way around. But we quickly forgave and forgot about this attitude because Safaricom had no prior market experience at the time. They have since, more than made up for it. But it is this kind of the initial second-guessed peculiarity that needs to leave the insurance industry like last week. The hunger for insurance products like in the handsets case, is immense but is not too obvious to the industry's present pecking order. The part that needs 'Aromat' is lacking.

Again, similar government deficiencies thrown at bankers have only made them grow astronomically, for example, the treasury bonds business and some 'could-be-improved' regulations have given the banks unprecedented quantum leaps. This is why the bankers still made profits during the long interest rates controls standoff with parliament, having suspended new business, and even now during the Covid-19 tribulations as well. That is precisely why they are laughing all the way to their offices on high street. So when others are given a lifeline, they take it and run but our insurers fail to see the opportunity in what is not covered in the Associateship of the Chartered Insurance Institute - ACII syllabus. ACII is one other off-the-shelf import with no local specifications.

So is it that insurance is a different game altogether or the people in it are wired peculiarly? Or could it be that Covid-19 was the much-needed trigger to press the reset button? The kind of sneeze that brings relief to a blocked nose, I suppose.

When all around you are growing faster than you, no matter how hard you try, then you must venture outwards to grow. Ride on their momentum.

It is my strong belief that insurance companies should have moved in very fast to supply Personal Protective Equipment -PPEs to the country at the onset of the covid-19 pandemic via structured vehicles because of rules governing how premiums money can be used. But because they are too tunnel-visioned, they are waiting for things to get back to normal. If you are in the risk business, you must actively trade in risk-related products that make business sense at the time. Or don't we have strategic response mechanisms or plan Bs to commercial threats in the sector?

Again, you are in the health space but you are not trading to supply the kind of drugs that would permanently influence a critical component, in your efforts to flatten the expenses curve of the much desired structured compensation mechanism. It is to your long term benefit. No amount of lobbying and conferences will change this until you put your skin in the game.

You are in the comprehensive insurance business but you are not in any way involved in the supply of car accessories including tyres that would minimise on accidents to your long term advantage. Competitive forces notwithstanding, why not buy the recently shut down Sameer tyres business as AKI and put some science behind it to produce tyres suitable for our roads? You would then insist on having all your customers using your tried and tested tyres hence suppressing the cheap and lower quality imports that got Sameer out of business. By now some are saying: "who does this guy think he is to tell us this?" I am a friend of the industry, amicus.

All the motor vehicles that you insure use fossil fuel. And as we now know it, oil generates good revenues for GoK, yet you seem happy with a ones-in-a-year premium as your full share of the cake. If anything, your presence in the oil business would help to cut off the adulteration that happens at the expense of the vehicles that you cover.

More resources generated from other sectors, when ploughed into the insurance industry, will surely provide the much-needed oomph for it to comfortably elbow its way higher up the financial sector matrix.

If you are in business in Kenya today, you have no apologies to make when operationalising subsidiaries that put you firmly in the mix. But of cause, industry captains are in those businesses that I have mentioned above, and more so, as side businesses that grow them faster as individuals and very independently of the industry. Now is the time to bring the best of both worlds into the industry. Bring home your best resources and experiences.

Unfortunately, l have heard time and again that insurance companies invest money in the sectors that I have mentioned above, through publicly listed companies. That is not enough because everyone else is doing it too and it has kept you at below 3% penetration anyway because you have no room to influence the fundamentals.

I have also heard that the Monopolies Commission will be a hard nut to crack when presented with proposals to allow monopolistic takeovers. But again, well-intended monopolies are always welcome, provided that their presence shall improve the overall well-being of the economy and the citizens. Isn't that the reason why Safaricom exists as a behemoth? Its imposing presence has brought much-needed relief to our financial system as it now operates both efficiently and effectively for all irrespective of social status. Wake up before the likes of Safaricom begin to outpace you like it has done with banking.

Underwriters are yet to broaden their understanding or acknowledgement of present-day risk. Dig this, the man who invented the insurance business, eats bacon, eggs, sausages and toast -BEST for breakfast as a matter of tradition and if he was literally alive today, he would still be living in England. The health-conscious traditionalist Kenyan underwriter, eats arrow roots, sweet potatoes or cassava for breakfast. A whole world of a difference in diet should hint to our underwriters that local innovations will still pass as insurance business. That is why what the West calls weeds, we call traditional vegetables. When we conform unquestioningly to all global practices, we miss the unique opportunities emerging right under our noses. We are playing catch up with external trends that we tropicalise for a reluctant market whose pressure points are local and not global.

That, the penetration levels have failed to grow beyond the early single-digit percentage mark, is the biggest signal that the insurance business in Kenya is marking time as other sectors match on to greater heights. It is a simple fact that the insurance sector is growing on the back of other sectors and even at that, not fast enough. This means that the insurance business in Kenya is only growing because the economy is growing and it would keep growing without insurance. Others are forcing growth around themselves through innovative offers. It could be that all the changes that have taken place in the industry have happened more to support the needs of the growing sectors than as a sign of the business coming of age. The house-boy has only dressed better today because the master's boss is coming over for lunch. Dress him better all the time as if the boss is coming over frequently. Force the growth. But again, always remember that a child who takes too long to come of age begins to fossilise.

Luckily, there is hope. Unfortunately, this is not the kind of hope that is encouraging to those who were already senior enough in the industry when Bogi Benda and Juha Kalulu were heroes. There is a disclaimer though. Not all old people in insurance are unproductive.

Again, here I am just the brave messenger so don't shoot me. I am your better friend as I am telling you the truth in broad daylight however bitter it is to swallow.

The real competitors of the insurance sector are the old guard in the industry. The entire industry talks behind their backs in harshed tones. Yes!, even those guys who are most loyal to you have plenty to say. Suffice it to say that the old guard are heavily invested as they have their skin in the game, but a quick age comparison with peers in other sectors surely makes the insurance industry the leading contributor of corporate grandfathers. And when it's not reflecting in the C suites, it manifests in an all-powerful board member who is immune to present-day realities. The widening age gap makes it a challenge for them to be referred to as colleagues in the true sense of the word.

The old guard have plenty of experience but from a world that we are fast moving away from. The experiences that they possess are already coded in digital-world type algorithms now used by the young underwriters. It is high time that we lowered the average age in the insurance industry's executive suites and boardrooms. If this is not possible, then a genuine and healthy rebirth of their mindsets is badly needed, as any persistence with past and present beliefs will repeatedly deliver stillbirths.

I have always believed that innovation, is first local before it can assume global dimensions. We cannot wait for our demographics to be at par with those of developed countries so that the uptake can be realised, like for like. That is what we are doing. That is what the old guard are doing. We are satisfied with a below 5% penetration level and very happy to take lifetime achievement awards for keeping it that way. So do you still doubt where the problem is? It cannot be that it is everyone else all the time.

No amount of technological dexterity or product innovation has grown the industry significantly because it remains to be just as fast as the slowest powers-that-be, in it. Statistics reflect that this cabal doesn't attend empowering programs such as Leading The (present-day) Board, and director development seminars and thus deny themselves the pleasant opportunity to upgrade and update their personal operating software.

The insurance industry in Kenya is as powerful as the majestic African elephant but it is the kind of elephant that was tethered from calfhood so that even when free, it still operates from no further than the radius of its previous confines. The time has come for the industry to look up to new patriarchs (reformed or otherwise) who can walk it away from neo-static or at best, small stepped practices, to more futuristic approaches that are robust enough and fit for purpose. But in the same breath, we must be very thankful to the Titans who have a story to tell too. And it's one packed with rare gem experiences in their uncharted endeavours to leave us with a scalable industry.

By the way, a closer look at the biggest players in the industry tells me that they benefit from an ecosystem with favourable businesses in other sectors that are adjoined by a common but hidden umbilical cord. They have better control on their costs. What happened to the rest of the crowd? Or is it that those other umbilical cords are really tucked away from plain sight? I have my doubts.

The real competitor is now out of the bag but let us not practise age discrimination. A mental software upgrade will go along way in growing the industry. They say: "feedback is the breakfast of champions." So come out and compete for GDP and not amongst yourselves.