Firm seeks to bridge insurance penetration gap amongst small businesses

When the Covid-19 pandemic hit, resulting in health-related disruptions at the workplace, Stephen Lokonyo, the Managing Director of First Assurance, led a team of ICT experts, insurance underwriters and financial experts in developing a product that would enable businesses to manage the tough times.

The product would specifically cater to the small and medium sized enterprise market, which was disproportionately affected by the pandemic, with many businesses having to dig deep into their pockets to cover their medical costs.

“The SME sector is a huge driver of our economy, contributing over 30 percent of our GDP. It is also the biggest employer, yet tragically, it has been excluded from some of the most useful and necessary insurance covers that the market has to offer,” said Lokonyo in an interview with Powering SMEs.

The product, dubbed First Afya Biashara, would cover health issues that had become prevalent at the workplace as a result of the pandemic, such as mental health and substance abuse.

It would also cover complex health issues that traditionally have not been covered by insurance, including fertility and In Vitro Fertilisation (IVF).

“Health insurance has been one of the products that has had the lowest penetration. Usually that is as a result of the complexity and cost structure of the products available in the market, which inevitably has left out the SME sector,” said Lokonyo.

According to official data, the average rate of insurance penetration in the country is less than three per cent, a figure that is largely driven by corporate insurance.

If they would be able to encourage uptake of insurance amongst the SME market, then they would be able to increase the national rate of insurance coverage quite significantly.

However, in order to achieve this, Lokonyo says that they would have to address the unique challenges that SMEs face, including the cyclical nature of their income.

Premium finance

“The small number of employees in these organisations was also something that we had to look into. So, we had to make it flexible and affordable, so that a client does not buy a product which they do not require,” he explains.

The firm also partnered with banks, to give SMEs access to premium finance so that if they had challenges associated with the cyclical flow of their income, they could spread-out payments over a period of between six to nine months.

They also tried to address policy issues that have previously discouraged SMEs from buying insurance products including exclusion from open panels. 

“We tried to minimise exclusion while still ensuring that the cover has elements that speak to the new legislative requirements like mental health and the new realities of how difficult the workplaces have been lately for individuals and families,” explained Lokonyo.

Lokonyo and his team were also alive to the fact that as a result of movement restrictions imposed by the pandemic, people would only want to buy insurance if they could access it in more convenient ways.

Thus, they invested in IT infrastructure including an interactive website and USSD code that would enable anyone with a phone or computer to easily access their products, initiate proposals, get terms and confirm the cover of their choice.

They then entered into partnerships with mobile service operators to enable those who made a decision to purchase their products, to make payments from their mobile wallets without much of an issue.

“We are in the process of developing portals both for customers and our intermediaries so that then it is easier to track the transactions that we enter into with them,” posed Lokonyo.

Health insurance

They also had to invest in customer support, to ensure that anyone who signs up to their products gets assistance at any time of the day or even at night, thus reducing customer distress and complaints.

“We have a 24-hour call centre which is very useful for health insurance. Illnesses do not have a specific timing; you can have emergencies late in the night, over the weekends or at odd hours,” noted Lokonyo.

With a target of onboarding at least 10 percent of the SME market within the next year, Lokonyo says that even though these investments have cost them significant resources, they have enabled them to make great strides as a company.

Within the last two years, they have expanded their reach, opening two new offices in Nyeri and Eldoret towns. They have also initiated partnerships with brokers and agents in other towns where they do not have offices.

In collaboration with financial partners such as Absa bank, they have also managed to roll out specialised covers required by banks, the construction sector, professionals such as doctors and architects, employee covers and other general insurance products.

“Over the last three years, it has been tough for the insurance market, but during that tough period, we have been able to make great strides and grow our business on average 10 percent year on year,” said Lokonyo.

While appreciative of the support they have received from the regulatory agencies, Lokonyo calls on the government to be more agile in addressing the needs of players in the industry, for them to keep up with the changing dynamics in the market.

These include the recent disruptions in the business environment occasioned by the nationwide protests and the floods which occurred earlier in the year, both of which have led to loss of lives and property at a massive scale.

“Being part of the financial sector, the insurance industry gets impacted very quickly by tough economic conditions as well as natural calamities, but with all that the sector is resilient and we are confident we will bounce back and meet the objectives that we set out to achieve in 2024,” says Lokonyo.

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