Ask most people what life insurance is, and they will tell you it’s a policy you buy that pays money to your family if you pass away. Life insurance is a contract between you and an insurance company. Essentially, it is designed to protect your family and the people depending on you for financial support in the event you lose your income due to critical illness or untimely demise.
There are two main types of Life insurance policies which are; Protection policies that are designed to pay a benefit if the event that is insured against happens and investment policies whose main goal is to grow the capital put in by policyholders.
Although life insurance is a scary thing to purchase, it has now become a necessity being an important aspect of social-economic development in society. According to 2020 IRA Q2 industry statistics, the total net premium income (NPI) reported by long term reinsurance companies (life insurance) in Q2 2020 was Ksh.1.52 billion compared to Ksh.1.42 billion reported in Q2 2019 representing an increase of 6.6 per cent.
Association of Kenya Insurers (AKI) 2019 annual report shows that in 2019, gross written premium in life business increased 12.14 per cent to Ksh.97.85 billion. However, the same report states that life insurance still lags behind in terms of penetration in Kenya. Only 42.30 per cent of gross written premiums make up Life business as compared to General business which makes up 57.70 per cent of gross written premiums.
Many myths and negative perception towards life insurance has majorly contributed to its low penetration. In many African cultures, thinking about, or even planning on life after death, is often considered a taboo. As a result, many are wary about purchasing life insurance. Life insurance is perceived as something one acquires in their late 40’s and 50’s by Kenyan youth. The reported and broadcasted cases of policy holders being killed by beneficiaries in order to claim the insurance pay out, has contributed to few people taking up the cover.
Despite the common misconceptions towards life insurance, we come to realize more and more that it is a fundamental part of having a sound financial plan. With this cover, one pays monthly contributions for a specified period of time. In the event a bread winner falls sick and is left with no ability to generate an income to support their family, this cover comes in handy in offering financial support. In the unfortunate case of death occurring, a death benefit is paid to one’s beneficiaries. Apart from illness and death, life insurance cover empowers people to save for the future as it’s also a savings and wealth planning tool.
The low level of penetration of life insurance in Kenya continues to create an attractive environment for both local and international insurance market to expand and tap the huge uninsured population. As players in the industry, we can boost life insurance uptake by addressing certain myths around life insurance, thrive to become industry experts for consumers to find out what policy best fits them and their financial needs; innovative ways of creating awareness on life insurance.