Life insurance crisis as State holds onto Sh600m in claims
Unclaimed Financial Assets Authority chief executive Kellen Kariuki. UFAA has raised concern over large sums in unclaimed life insurance benefits. FILE PHOTO | NMG
What you need to know:
Only South Africans seem to be more receptive of life cover across Africa, with penetration rates standing at approximately 15 per cent of the population.
A typical life cover entails someone signing up for a set amount, like Sh1 million.
And for those who buy cover, the Association of Kenya Insurers encourages them to disclose the information to those they have nominated as beneficiaries.
More than Sh600 million is lying unclaimed with the State, having been left behind by Kenyans who died without informing their relatives that they had life insurance covers.
The unclaimed cash, which points at a scenario where people fear disclosing that they have a policy lest their kin eliminate them, has made Kenyan insurers urge citizens to be more open with their relatives on life cover to ensure the benefits are drawn without a hitch when they die.
According to Ms Kellen Kariuki, the CEO of the Unclaimed Financial Assets Authority (Ufaa), the exact amount as of Friday was Sh610,980,456 — comprising five per cent of all unclaimed monies.
The revelation by Ms Kariuki came as tongues continued to wag over the case of Evans Masaku Kasyoki, the man being tried following an accusation that he secretly bought two different insurance policies worth a total of Sh10 million for his nephew then murdered him.
MENTALLY EXAMINED
Mr Kasyoki was on Wednesday presented before a High Court deputy registrar in Machakos and the court ordered that he be mentally examined before taking plea.
Before that, stories of individuals who had arranged for the murder of their spouses so they could pocket insurance benefits had been commonplace, both locally and abroad.
Such tales have sent even colder chills down the spines of most Kenyans who often frown upon any post-death arrangements.
Whether it is buying a life cover, writing a will or paying towards funeral expenses in case of death, there are Kenyans who will be hesitant to sign up, as revealed in the Sunday Nation’s interviews with players in the insurance sector.
“The topic of death in some African cultures is taboo. It could mean invoking a bad spell or omen to oneself, or one’s family,” said Mr Bernard Shisanya, the head of ordinary life sales at Britam Insurance.
“Such beliefs have a potential to be a source of objection to the discussion about planning for death taking up an insurance policy,” he added.
LIFE INSURANCE
The industry estimates say less than three per cent of Kenyans have life insurance. Only South Africans seem to be more receptive of life cover across Africa, with penetration rates standing at approximately 15 per cent of the population.
Mr Shisanya said Kenyan life cover purchasers are individuals with high awareness levels who “are more receptive to discussions on death”.
Top among the concerns by Kenyans who discussed the matter with the Nation is the risk of being murdered.
We were informed of a local bank that bought life cover for its staff, but the beneficiaries were warned not to inform those listed as the next of kin lest they be “sacrificed” for the cash.
A typical life cover entails someone signing up for a set amount, like Sh1 million. The agreement is that should the person die, the next of kin they nominate gets the set amount. Some companies also provide the option of paying the sum if the purchaser is seriously incapacitated.
MOBILE MONEY
Should the person not die within a certain period, there is usually an option of withdrawing the amount after a number of years, typically a decade. Once signed up, the person services the policy through deductions on their salary or by sending cash via mobile money. The tricky part is nominating the beneficiary.
“It will be hard to tell my wife because I fear she might get influenced and eliminate me,” said Nairobi resident Isaiah Nyandoro.
Mr Shisanya, the Britam life insurance boss, said it is a tall order convincing individuals like Mr Nyandoro to buy a life insurance policy.
“Many wouldn’t like to talk about death or probably imagine that they will at one time die, and so they tend to shy away from that topic,” said Mr Shisanya.
Mr Shisanya further said: “Normally, it takes a lot of convincing for them to take a life, or a funeral expense policy, where the benefit could be used in the event of death of the bread winner, which greatly eases the financial burden to the affected family.”
BENEFICIARIES
And for those who buy cover, the Association of Kenya Insurers (AKI) encourages them to disclose the information to those they have nominated as beneficiaries.
“Ensure you have listed someone as your beneficiary. It would also be good to inform the beneficiary that you have taken out life insurance,” AKI told the Sunday Nation through communications officer Hazel King’ori.
“We have had instances where no one claims since the beneficiary was not aware,” the association added.
Mr Shisanya said individuals with huge families also tend to struggle when nominating the next of kin, partly because there is a limit to the number of beneficiaries.
It is also common for employed folk to buy funeral cover for their parents, but the unwritten rule, as we established from our discussions, is that the parents are never informed or they may start worrying about their children’s intentions.
“By and large, many would not inform the parents, because of the perception that they would be actually planning for, or looking forward to, the demise of the parents. So they would rather keep it under wraps,” reasoned Mr Shisanya.
GROSS PREMIUM INCOME
But even as a majority of Kenyans frown upon life insurance, data from the regulator shows that the amount of money remitted to be given in case of death or serious incapacitation is rising by the year.
The Insurance Regulatory Authority indicates in the Economic Survey 2018 that gross premium income has been rising in the five years to 2017, starting from Sh44 billion in 2013 to Sh82 billion last year.
“This means that there are more lives insured,” said AKI, adding that by the end of last year, there were 26 life insurance companies in Kenya. A 2013 study by Julius Odemba, then a Master’s student at the University of Nairobi, revealed that most customers with life insurance policies were living way above the poverty line, with monthly net incomes of above Sh35,000. Life insurance aside, AKI wants more Kenyans to buy cover for their funerals.
AWARENESS CAMPAIGN
“AKI will be carrying out an awareness campaign on funeral insurance from the end of August. Our focus will be on the high cost of funerals,” the association said. “Funeral insurance is very simple to understand and affordable product, average of Sh1,200 per year. Payment to beneficiary is made within 24 hours of notification of death.”
Elsewhere, Umash Funeral Home is also selling three different funeral cover products. The most advanced plan, dubbed “Umash Superior Plan”, has features like an executive hearse with a chase car, a metal or wooden coffin, a one-day advert in one of Kenya’s top two dailies, a wreath of flowers and a high-resolution portrait. Fancy that?
