Dr. Hassan Bashir gets his PhD in Insurance (Leadership-Corporate Governance- the insurance industry in Kenya) in September, this year. He is the Chairman of Umma Insurance, a start-up insurance brokerage firm based in Nairobi that is out to change the face of insurance service provision. In his large, quiet upmarket office in Milimani, Nairobi; as his team move about tackling the day’s assignments and handling business, he talks about the industry, the gaps, trust and how he intends to take Umma to the 10 leading insurance firms in Kenya and in the region.
Less than a year ago, Umma Insurance ventured into the insurance industry in Kenya. What is the landscape like? An overview of the Kenyan insurance sector…
The insurance industry in Kenya is well structured. It has about 54 underwriters, 5 re-insurance firms, 213 brokers, over 9200 agents and there are risk managers, loss assessors, loss adjusters, loss investigators and a number of other companies within the structure of the industry. Other key institutions in the industry include the Association of Kenya Insurers (AKI), Association of Insurance Brokers of Kenya (AIBK) and of course there is the insurance regulatory authority as the industry supervisor. Beyond this there is the Insurance Institute of Kenya (IIK) and there is also the Insurance College which takes care of the education, in terms of talent development for both Kenyan industry as well as the wider region.
The sector is one of the most vibrant sectors of the economy. It contributed overall revenue of about Sh 297 billion, approximately 2.5% of the Kenyan GDP in 2018.
Why is there a need for insurance brokerage firms?
The intermediary sector is engine of the insurance industry exist with respect to both product development and market development. The intermediary sector is largely responsible for taking the taking insurance to the public. A significant percentage of the annual premium written in the country is done by the insurance intermediaries. This sector is largely responsible for awareness creation among the public, the corporates, the SMEs… their role is very-very significant.
Without the brokerage sector, the insurance sector will suffer a significant minus in terms of their ability to explain insurance, their ability to market, their ability to service and manage claims. The brokerage sector is also involved in product development. Quite a lot of the products you see in the market are developed by brokers and carried by underwriters.
As a brokerage firm, how is business at the moment?
Well, we are a start-up. We are in our first year, so we are testing the market. This means a lot of engagements. We are involved in quite a lot of product development that we want to introduce in the market. These are our first six months.
According to both AKI and the Insurance Regulatory Authority (IRA), the potential for this market roughly 6-7% of the GDP. What this really means is that approximately this industry should be writing Kshs 600 billion in premium. The sector writes about half of this at the moment. So, in terms of opportunity in the Kenyan market, we are barely scratching the surface. Our focus is in three key areas: one is demystifying insurance and make it easily accessible; two is to improve delivery so that every Kenyan can have access through digital platforms (unsophisticated delivery) and the last area of focus is to build trust within the sector.
For example, what informed our decision to be keen on insurance access through digital platforms is the data (gathered through our research and market study) on the gaps in the market: Mobile penetration in the country is about 100%, meaning nearly everyone has a phone. Mobile banking is about 90% and less than 3% insurance penetration. This tells you the kind of miss-match that exists. Despite this low level of penetration, Kenya’s insurance industry happens one of the fastest growing insurance markets in the world and has the fourth highest penetration as a percent of GDP in Africa.
“We are a Pan-African company. Our goal is to get into the rest of the African market. We can talk business with Mogadishu entrepreneurs or a Ugandan client and offer risk management to them and their businesses.”Dr. Hassan Bashir
You mentioned new products that you and your team have been working on. What kind of products are these?
We are working on improving market access to medical, both individual and corporate. The medical products are well known, it is a traditional product. But we want to present it in our own way. We are working on mass travel product and mass personal accident cover. We are working on popularising and improving access index insurance, especially livestock across IGAD region. We are looking at student accident insurance, on a big scale, delivered easily and cheaply.
There is this bit about trust (or lack of it) in the insurance industry. How are you going to be different from the insurance firms that are already in existence?
First of all, there is a dependency. Insurance is a network. That means delivery of service can be good at Umma Insurance but delivery of payment of claims is only as good as the underwriter. Our plan is to select the best underwriters to work with in the country and in the region. And there are quite a number of these good underwriters. Of course, you cannot say this about all the underwriters. One of the ways of solving this, for us, is to lock on with the right underwriters.
Our market research tells that the insurance sector in the region as a whole is bedevilled by fraudulent claims, sophisticated products worded from an underwriter’s viewpoint, lack of product differentiation, competition based on price and public misunderstanding. This informs our plan to work hard at demystifying insurance and the products we offer to the public. We are doing public education and we will carry on with this for quite a while. The goal is to simplify our products and services so that the customers know what they are buying from the start and know how to report loss or damage. Basically, we want to breakdown for our customers the key things that create insurance as a product. What they walk out of an insurance office with is a policy document (in exchange for money) that carries a significant promise. We want to make sure that such promise is kept. At Umma Insurance, we intend to simplify insurance contracts so that even the humblest person in our communities can understand what they are buying and how it creates and becomes value for them.
What other misconceptions about insurance would you like to dispel?
There is the general false perception that when you pay a premium, you are actually buying the policy with your premium only. Insurance is a community-based scheme. When you buy a policy, you are paying into a pool. The public needs to understand this. That pool can pay you back or it can pay back someone else. The premium you pay is never equal to the asset you are protecting. It is a fraction that goes into a pool which ultimately will compensate you if you are in difficulty. You are buying the policy with the premium of everyone else. It is the only way for example, that a premium of Kshs 100,000 can compensate a car of Kshs five million. It is a community pool and the public needs to understand that when ‘I don’t claim, someone else is being paid’.
How have things changed from when you begun to this moment? How are things now?
I have been in insurance for about 23 years. First, I set up a brokerage firm in 1997 and managed for a number of years. Then I developed the business case of the first Takaful underwriter in the region, took through regulatory licensing in 2011 and managed it as the CEO for a while. During this time, I also managed to take through regulatory licensing a Family Takaful product in Kenya and the first shariah complaint umbrella pension scheme in Kenya and a takaful operator in Somalia Now, I am back in the brokerage sector with ambition across Africa. I have been through the industry…you can say gone full circle. I served as the Treasurer of AIBK in the 90s and served on and chaired the Board of Association of Kenya Insurers (AKI) until September 2018.
The brokerage sector still continues to do what it used to do back then…which is basically to be the link between the market and the risk carrier (underwriter). A lot of underwriters do not go to the market directly. Their business is aggregated by the brokers. For the brokers, the duties are still the same: Educate the market, take the products to the customers, represent the interests of the customers, ensure that the customers are not hassled in terms of their service needs, ensure that customers are served well when claims arise and claims are paid. It is worth noting that the strength of brokers also varies: There are one-man brokers, there are solid brokerage firms.
Umma Insurance is targeting to be within the top 10% of the brokerage sector in Kenya and in the region. We are building a very strong team here. We currently have 12 members and expect to grow to 20 by the end of quarter one of 2020. Our team members have underwriting capacity, business management capacity, claims management capacity, actuarial and re-insurance capacity. This gives us the capability to serve our customers well.
Brokerage is a multi-audience type of business. You link the customer to the underwriters. That means you serve two different sets of clients and therefore have to balance their happiness and satisfaction with the services or products they get. How does this sit with your own need, as a firm, to be happy and satisfied?
First, it should be understood that a brokerage firm represents the insurance consumer and works at all times to protect the interests of the customer. Brokerage firms and insurers have a partnership relationship. However, the client is not served well unless the underwriter can handle the risk. The underwriter cannot handle the risk unless they have the right information about the risk. The role of the broker is to make sure that the underwriter, who is the carrier of the risk, can see 360 degrees of the customer’s exposure. That they can see the entire risk. A good broker understands his client, understands the risks and then reveals that information entirely to the risk carrier, so that the risk carrier doesn’t have blank spots in their understanding of the risk.
The broker sits pretty when the underwriter has understood everything and the client is fully represented. This is when a broker earns his commission on the account.
“‘Our plan is to select the best underwriters to work with in the country and in the region.’Dr. Hassan Bashir
How far are you looking to go in the next few years?
We have an African market ambition. Our goal is to get into the rest of the African market. For now, we are in Kenya, but we are growing into other markets like Somalia, Ethiopia, Uganda, and Tanzania. We can talk business with a Mogadishu based entrepreneur or a Ugandan client and offer risk management to them and their businesses.
Considering your expansion to the IGAD region and to the rest of Africa, how is the current Somalia insurance industry?
The business market in Somalia is very vibrant as I see it. It is an aggressive market through largely trade based. It is an entrepreneur’s market with growing investment and high risk taking. Given the growing stability and further consolidation public infrastructure, Somalia’s market is likely to see sustained high growth. For such market, a grounded insurance and risk management sector is very necessary. It is important to note that comprehensive underwriting within Somalia has been in place since 2013 when Takaful Insurance of Africa opened its doors to the public. A number of other insurance firms have since followed, though with very limited capacity if any. The next few years will see the industry in Somalia grow, compete and consolidate.