The Treasury has capped microinsurance premiums at Sh40 a day under new regulations that seek to boost risk coverage among the poor.
The regulations define a microinsurance product and offer rules to guide firms on how to operate cheap insurance.
Besides capping the fees, firms will offer microinsurance cover not exceeding Sh500,000 to compensate for illness, injury, death or loss of property with the contracts capped at one year, but subject to renewal.
Kenya insurers have remodelled their products to target the poor via small premiums, but analysts reckon they do not fit under the microinsurance model including shorter contracts and speedy settlement of claims.
Under the new regulations published last week by Treasury Secretary Ukur Yatani, micro insurers will be required to settle claims within 10 day or seek regulatory approval for delayed payment.
“The amount of daily premiums or contributions shall not exceed forty shillings … the sum insured shall not be more than five hundred thousand shillings,” Mr Yatani said through the regulations.
“A registered insurer engaged in microinsurance business shall continue providing such products and regularise compliance with these regulations within three years from the date of the coming into operation of these regulations,” he added.
The regulations are also meant to boost usage of insurance among Kenya’s poor who hinge on traditional and inadequate risk mitigation mechanisms such as social networks to meet spiralling medical, school and funeral costs through the so called harambees.
Kenya’s insurance penetration — the ratio of the value of insurance premiums to GDP — has remained at less than three percent for decades, and in 2018 dipped to a 15-year low of 2.43 percent.
FinAccess survey revealed that more than half of workers earning more than Sh50,000 have some form of insurance.
But less than a quarter of those earning between Sh20,000 and Sh50,000 had insurance, leading insurance firms to target this segment to boost profits.
George Nyakundi — General Manager at ICEA Lion Life Assurance reckon the cheap products in the market are not fully micro insurance, arguing that the new regulations will address the gaps that have hindered access across the low income segments.
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