Microinsurance is a broader concept of microfinance that is used to refer to insurance characterised by low premium and low coverage limits. It is sold as a typical risk pooling mechanism and its designed to service the low-income persons and business not covered by the typical social and commercial insurance providers. Microinsurance packages insurance products for low income earners and focuses on a segment of the population that consumes between Kshs 100 and Kshs 400 per day.
The main aim for microinsurance is protecting low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risks involved. It relies on pricing of products as accurately as possible with the expectation of low margins and the sale of large volumes of business (low-margin/ high volume). Microinsurance companies are in a better position to come up with products that care for the low-income earners as they understand the issues from the grassroots.
Microinsurance in Kenya was introduced in 2013 and has not really taken a proper shape as we are still at a general insurance penetration of 3.1% of the GDP, making it an untapped market. This might be attributed to a couple of things among them being low levels of disposable income, a poor savings culture and a negative perception towards insurance, lack of knowledge on how the insurance sector works among others. The low penetration percentage is also evident as microinsurance contributed to 1% to the total percentage of premiums in Kenya.
With Kenya being branded as a hub for technological advancement in East Africa with an internet penetration of over 90% and a mobile penetration of 80%, microinsurance in collaboration with the Mobile Network Providers would be better suited to improve the financial and social well-being of individuals and households, thus boosting the overall economic prosperity of the country.
With the mobile network Operators rolling out different forms of mobile money, microinsurance should focus on this sector and venture into FinTech to better deliver their insurance products.