Life insurance penetration in Kenya is at 1.07% while non-life insurance penetration is 1.91% giving a combined 2.98% penetration. That is very low compared to South Africa that is at 14.1%. In Africa, South Africa, Namibia and Mauritius seem to be the only other countries with higher penetration rates. This low penetration has presented a nightmare to insurance companies; an industry with too many players chasing for too few customers. With this situation, the industry has deployed insurance brokers, agents and banks (bancassurance) to distribute its products.
Logans, a leading horse insurance firm in Australia, states that an insurance broker has a fiduciary duty to act in the best interests of their client and provide sound practical advice which is independent of any insurance company’s influence. An insurance broker is similar to an accountant or lawyer who provides impartial professional advice, based on years of training, education and experience.
Unlike the common brokers in the market place who often bleed both the seller and buyer, insurance brokers are a different lot. They are regulated by law and contracted by insurance companies. They negotiate special rates with insurers and then go on to sell to potential clients based on the special rates.
How it works
A broker enters into special arrangements with insurers to sell insurance, collect premiums, service the policies and do claim administration. By doing so the workload on the insurer is significantly reduced. A sort of outsourcing the function. With this role they derive brokerage income.
Why choose a broker and not an agent or direct to underwriter
While taking a cover most people will place pen to paper without reading the fine print that is terms and conditions of a policy. A broker acts as that link that provides a customer advice and consultancy concerning the various products. As with everything, cheap is not always necessarily the best.
Brokers will give you different rates from different insurers, mostly the best insurers. They will then narrow down to the best possible giving you the cons and pros of each product from different insurers and thus giving you the option to choose the product that suits you. An agent or an insurer will not do this to you as a customer.
This is because an agent would be biased because they are licensed to handle products from one insurer only. Insurers would also be biased since they only sell their own products and would not reveal to you the rates or superiority of products from their competitors.
The brokers’ rates will be lower than if you had walked into an insurer’s premise or if an agent sold it to you. The chief reason being that brokers negotiate special rates with insurers and benefit from the economies of scale and also benefit from the fact that insurers outsource most of their functions to them.
In summary a broker will assess your needs, give you advice after comparing different products, help you in case of a claim and being available to answer questions after purchase as well as informing you upon renewals.
If you need an insurance policy today; be it medical, education, savings or pension plan. Walk to an insurance brokerage firm. You will get value for your money in terms of pricing, quality and advice. Kenya has 139 insurance brokers as per AKI annual report 2015. Among the leading insurance brokers in Kenya are Aon Kenya, Chancery Wright, Clarkson, Majani among others.
Hillary Chepkoi is an expert in insurance matters. He can be reached on hchepkoi(at)gmail(dot)com