Skip to main content


The ancient Chinese farmer, medieval Venetian merchant and the conquering Victorian company man had one thing in common. They took insurance. Arguably, our civilization has gone this far because men took risks and knew there was a fallback plan in the face of insurmountable odds.

Generally, the insurance industry has grown over several centuries into a hydra of products and services, vastly complex and vaguely understood. However, through all its manifestations, the primary goal of insurance is to hedge against the risk of contingent loss. To this end, it has failed to ignite the African imagination.

Historically brought by the white man as he colonized and disenfranchised Africa, Insurance has suffered shame in the hands of a misinformed continent. Only the affluent and middle class seem to grasp its power with penetration rates in the continent below 5%. Insurance agents have also failed to inspire its uptake with a general feeling that they are unreliable, untrustworthy and missell the complex product they represent.

Let us underline the fact that more than 48.5% of sub-Saharan Africa live on $1.25-a-day, 414 million people as of 2010.  More than 70% of the poor in Africa live in rural areas and depend on agriculture in smallholdings.
The grim picture is that they are faced with poor crop production, lack of access to markets and poor infrastructure. They are poorly organized, isolated beyond the reach of social safety nets and poverty programmes. HIV/ AIDS is also a burden…

While this is happening, Insurance companies are doing brisk business in the cities and towns fighting for a dwindling upper to middle-income market, made up of mainly formally employed people. The competition between insurance companies in Kenya (one of the best performing insurance markets in Africa) is dire, with 49 licensed insurance companies, fighting for a market with 3.4% penetration. Traditionally they have been risk-averse with most of their investment going to ‘secure’ government securities.

There was a predominant lack of customer focus, and lack of market intelligence to appreciate the needs of 90% percent of market, that is, the middle-low income to those living below $2 dollars per day (as shown in the diagram below). Before the mobile phone revolution, it would have been next to impossible and costly for the insurance industry in Kenya to tap into this segment of the market.

Fortunately, M-Pesa made financial inclusion a reality in Kenya. More than 70% of households in Kenya and more importantly, more than 50% of the poor, unbanked and rural populations use the service.
Technology is the primary reason microinsurance is one of the fastest growing microfinance products in the world. Does it then mean Insurance companies are on a trajectory to a massive disruption in a “software is eating the world” era?

The battle lines are being formed and a lot of strategic maneuvering is happening among the top insurance companies in Kenya. Acquisitions, cross border expansion, and engagement of pedigree global management consulting firms being the order of the day.

The reality is more modest; competition should be for the customer interface. A traditional brick-and-mortar-services approach will guarantee losses and certain demise.

To understand the mismatch, you need to understand what we call digital capital—the resources behind the processes key to developing new products and services for the digital economy. Digital capital takes two forms. The first is traditionally counted tangible assets, such as servers, routers, online-purchasing platforms, and basic Internet software. They appear as capital investment on company books. Yet a large and growing portion of what’s powering today’s digital economy consists of a second type of digital capital—intangible assets. They are manifold: the unique designs that engage large numbers of users and improve their digital experiences; the digital capture of user behavior, contributions, and social profiles; the environments that encourage consumers to access products and services; and the intense big-data and analytics capabilities that can guide operations and business growth. They also include a growing range of new business models for monetizing digital activity, such as patents and processes that can be licensed for royalty income, and the brand equity that companies like Google or create through digital engagement. (Sourced from McKinsey Quarterly - Measuring the full impact of digital capital)

Noninsurance companies (read Safaricom) with strong digital capital may be poised to redefine insurance in Kenya rather than the incumbent. The picture below paints this picture vividly. 

The disruption that faces the insurance industry in Kenya will be driven by the entity that understands and captures the microinsurance segment.
Digital disruption is driven in three dimensions simultaneously: new product, lower price and better customer satisfaction; cheaper, better and highly intimate. Information will become the tool of disruption and will bring about a competitive advantage.

Why will it happen? 

Insurance is an intangible product therefore the entire value chain can be digitized. To this end, there is a lot of experimentation happening in the market and innovation is inevitable. 

The potential client in the microinsurance market needs financial instruments to empower themselves. They need support and knowledge in farming. They need weather prediction. They need market intelligence on where to sell their produce profitably. They need cost efficient storage for their produce. They need instruments that allow them to pool in groups and buy life- changing machinery or equipment; they need subsidies et cetera. The intention is to ultimately reduce their risk and ensure their success, which in term guarantees their upward mobility.

To accomplish this, it is essential for the Insurance industry to exist in an ecosystem and borrow a leaf from other markets. In Peru, LA Positiva  uses rural water networks to distribute its products by adding premium payments to water bills. In Sri Lanka, Sanasa offers livestock insurance, with RFID microchips placed on livestock. It also offers weather index insurance offering protection against weather-related risks and natural disasters for food crops

Can the Insurance Industry in Africa align with community-based projects? Can they invest in projects that empower communities instead of offering traditional products? Can they be investors and partakers of the success of the farmers?

For this to happen, a link between financial services and insurance will have to exist and insurance products “will and must” be simplified and individualizeda necessary reality in an era of data analytics.

The main competition for Insurance companies in Kenya will definitely have to be indecision; a situation where people wait until a disaster strikes to pay out of their pocket for expensive health, funeral and other services. The other consideration will be family and informal savings and lending groups that people depend on when disaster strikes.

There is room for mutual microinsurance, which is more intimate, grassroot driven, community focused and inspires trust. As we speak, someone somewhere is studying it and developing a software solution that will cater to this market my hope is that it is an incumbent insurance company in Kenya.

In conclusion, microinsurance is a weapon for poverty alleviation. It is a safety net for microentrepreneurs, and with microfinance, it creates synergies for success.


Popular posts from this blog

The Key Heist

We all had those days, weeks, and months when something snapped, and we went a bit crazy. This is one such story I kept in the recess of my mind. I was barely ten years old.   "The phone is really nice and shiny," I said, reaching up. It was placed on a high cupboard, in a corner right outside my parent's room. It was kept there so we could also receive calls since our parents were always away working.   Unlike the one before, a quaint rotary system, this one was white and had buttons. It looked so light caged and padlocked in a metal contraption that held it down, hiding the buttons.   Big Sis was standing on a chair beside me engrossed. Her focus was on the manacles holding the phone buttons out of access. With no social media back then, and with little interest in television, Big Sis was looking at her only source of entertainment. The brightest girl in Laikipia District, based on her last award, was stumped. My eyes moved from her to the phone and wondered wha

My Adorable Younger Sister

  There was a screeching wail, and a tiny alien appeared in my parent’s bedroom. I was three years old when my younger sister was born. I remember holding her and couldn’t wrap my hands all round, and nearly dropping her. Still, I insisted. “Momma let me carry her,” I said. The alien had these alert beautiful brown eyes that seemed to say, “wait till I can get my hands and legs moving, and you will see,” Those independent eyes burned through my small skull. Maybe, that’s me trying to simplify years of interacting with her. I was there when she first crawled, there when she staggered and then stood, and there when she walked. Then held my breath, remembering her burning eyes as I held her when she was younger. I forgot the reason she did all these in quick succession was to keep up with her inquisitive, troublesome older brother. For three years, she silently watched, listened, and soaked it all in. Now she trailed me everywhere. She would release a shrill if I dared leave h


It was a cool Wednesday morning when President Uhuru Kenyatta of Kenya took a Matatu (never done before by a Kenyan President), from state house to the City Center; a route not covered by the public transport system that is widely used by the low and middle class in Kenya. In his speech a while later, he mentioned that he welcomed graffiti on Matatus, a total reversal of a previous government policy which had aimed to streamline the public transport system in Kenya. President Uhuru in the Matatu with Bob Colymore CEO Safaricom Matatu 'picks' President Uhuru Why had he made this statement? To understand this, I went back in time and looked at the checkered history of graffiti, and its effect on our collective psyche not just in Kenya, but also around the world.   The journey starts, many centuries ago in a prehistoric cave when a testosterone filled youth fresh from a hunt drew stick figures of men running after a buffalo, killing it and tha