Get­ting youth on board: What in­sur­ers can do

Nairobi Law Monthly - - Analysis - OS­CAR ONYANGO

The pur­pose of in­sur­ance is to neu­tralise or mit­i­gate the fear of fi­nan­cial ruin. In Kenya, the youth form the ma­jor­ity of the pop­u­la­tion, and there­fore for in­sur­ance mar­ket play­ers to ig­nore this im­por­tant seg­ment amounts to self rob­bery of huge fi­nan­cial re­turns and is no doubt a slow poi­son on the fu­ture health of in­sur­ance mar­ket. The bru­tal hon­esty is that the fu­ture sur­vival of the in­sur­ance mar­ket is highly de­pen­dent on the ap­proach given to the mar­ket pre­sented by this youth­ful pop­u­la­tion. With com­pe­ti­tion from the nu­mer­ous bank prod­ucts tar­get­ing the youth, in­sur­ance mar­ket play­ers must de­velop more ag­gres­sive and proac­tive strate­gies in tap­ping the mar­ket pre­sented by the enor­mous youth­ful pop­u­la­tion. The first step is to cre­ate aware­ness since it has been es­tab­lished that lack of in­for­ma­tion on in­sur­ance is the main course of youth ap­a­thy to­wards the up­take of in­sur­ance.

Af­ter carv­ing out the seg­ment of the youth­ful pop­u­la­tion for which the mar­ket play­ers are de­sirous of reach­ing, for in­stance the col­lege go­ing youths of the age be­tween 18 to 26 years, the reg­u­la­tor should em­bark on an ag­gres­sive out­reach cam­paign. How­ever, we must ap­pre­ci­ate the fact that young peo­ple are dif­fi­cult to reach through tra­di­tional chan­nels, and mar­ket play­ers will have to adopt mod­ern and at­trac­tive ways of cap­tur­ing the at­ten­tion of the youths in re­gard to in­sur­ance prod­ucts. Education-based pro­mo­tion is one way of do­ing it. It in­volves pro­grammes where stu­dents who per­form well in cour­ses re­lat­ing to in­sur­ance, are in­cen­tivised through schol­ar­ship or even in­tern­ship op­por­tu­ni­ties by the In­sur­ance Reg­u­la­tory Au­thor­ity and firms.

An­other way of pass­ing in­for­ma­tion on in­sur­ance could be by ty­ing in in­sur­ance in­for­ma­tion on pop­u­lar sites such as Twit­ter and Face­book which are fre­quented by youths, and also or­gan­is­ing work­shop as well as pro­mo­tional con­certs from where youths can be en­cour­aged to take up in­sur­ance cover by is­su­ing in­stant re­wards to those who take up poli­cies at such events.

The se­cond part is to re­move the hin­drance or bar­ri­ers that dis­cour­age youth in­volve­ment in in­sur­ance mat­ters. We can all agree that the im­pact of mo­bile phone ap­pli­ca­tions has been revo­lu­tion­ary. It then fol­lows that mar­ket play­ers can­not af­ford to over­look the need for mo­bile phone ap­pli­ca­tions in reach­ing out to the youths, whose ap­petite for in­stant and read­ily avail­able in­for­ma­tion placed in one pack­age is nearly in­sa­tiable. Let’s con­sider the Nairobi Stock Ex­change, which that has de­vel­oped a mo­bile phone ap­pli­ca­tion that makes it so easy to get in­for­ma­tion on the listed com­pa­nies, and how they are trad­ing in the cap­i­tal mar­kets. The ad­van­tage of this is that those in­ter­ested in pur­chas­ing shares are in a po­si­tion to as­sess the listed com­pa­nies in terms of their fu­ture prospects and are there­fore in a po­si­tion to make in­formed de­ci­sions. This would make a turn­ing point in the in­sur­ance mar­ket if in­for­ma­tion on the in­sur­ance com­pa­nies can be made avail­able to the pub­lic in re­gard to their sta­tus, whether reg­is­tered or not, and the prod­ucts they of­fer. The main point here is that the avail­abil­ity of such in­for­ma­tion would mit­i­gate if not dif­fuse the scep­ti­cal and laid back at­ti­tude that youth hold on in­sur­ance, while at the same time open­ing up new mar­kets in the ru­ral ar­eas from which, for long, the in­sur­ance com­pa­nies have shied away.

The In­sur­ance Mar­ket is an en­dan­gered mar­ket to­day with the ag­gres­sive and seem­ingly never end­ing en­croach­ment of banks will­ing to of­fer the in­sur­ance prod­ucts with the only

bar­rier be­ing the le­gal in­stru­ments at hand – the Bank­ing and In­sur­ance Acts. Th­ese out­lines the var­i­ous re­spon­si­bil­i­ties of th­ese the two in­sti­tu­tions and it is for this rea­son that the banks have sought to work in part­ner­ship with the in­sur­ance com­pa­nies – more as agents rather than providers. It would only take the reworking of the Bank­ing Act by in­cor­po­rat­ing pro­vi­sions that al­lows banks to of­fer in­sur­ance prod­ucts and ser­vices to pro­nounce the fi­nal death sen­tence on a num­ber of the in­sur­ance com­pa­nies!

Fuse with bank­ing

Be­sides the cam­paigns and aware­ness cre­ation of in­sur­ance to the youths, mar­ket play­ers must not over­look the need to in­cul­cate the cul­ture of sav­ing among the youths. Youth must be made to ap­pre­ci­ate the beauty and im­por­tance of sav­ing be­cause it’s only by do­ing this that in­for­ma­tion on in­sur­ance would make sense to them. The reg­u­la­tor can achieve this by reworking the in­sur­ance laws to widen the scope of prod­ucts that in­sur­ance firms can of­fer. This is to mean that the firms should be al­lowed to in­no­vate and of­fer prod­ucts that have huge trac­tion for this seg­ment. In­deed youths are ex­pensec­on­scious in­di­vid­u­als who will only part with their mea­gre in­come un­less it is for a highly at­trac­tive al­ter­na­tive.

It is high time in­sur­ance mar­ket play­ers con­sid­ered tak­ing up some bank­ing roles on a re­duced scale. This can be done by com­ing up with in­sur­ance poli­cies that have het­ero­ge­neous aspects of bank­ing and in­sur­ance in one pack­age. For in­stance, most youths would be in­ter­ested in in­sur­ing their phones and lap­tops among other ac­ces­sories against theft and van­dal­ism. It is al­most im­pos­si­ble to con­vince young peo­ple to pay pre­mi­ums where, should the risk fail to oc­cur, they are en­ti­tled to noth­ing. But to tell them that they can pay a pre­mium and be en­ti­tled to say half the to­tal they pay would be very ap­peal­ing. The ad­van­tage of such a pol­icy is twofold; first, it re­duces the temp­ta­tion of mak­ing false claims with the de­sire of hav­ing a new item through com­pen­sa­tion since it presents a win-win sit­u­a­tion for both the in­surer and the in­sured. Se­condly and most im­por­tantly its makes the in­sur­ance com­pany a banker for the youths through a plough­ing back mech­a­nism.^

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