Kenya has experienced an entrepreneurship boom across several sectors over the years. The 2023 Economic Survey by the Treasury acknowledges the role of MSMEs in innovation, leading to the creation of approximately 16 million jobs in 2023 across various industries.
According to the Small Business Development Centers (SBDC), a programme supported by USAID, it is estimated that 1.5 million MSMEs in Kenya are registered, while another 5 million operate in the informal sector. Despite these encouraging statistics, half of the SMEs do not have active insurance cover.
Acknowledging the contribution of small and growing businesses to Kenya’s GDP, certain business risks stand in the way of their growth.
An important conversation is the role of insurance in cushioning small and growing businesses from these risks. Business owners who have active cover have typically insured either their businesses or vehicles.
Fire insurance comes a distant third. Half of these insurance policies are with a single provider, perhaps indicating a preference for certain insurers.
Awareness of insurance providers is not a challenge, as 95 percent of business owners with active insurance are working with up to three providers. A majority of these business owners acknowledge that their policies adequately meet their current business needs.
The importance of insurance for SMEs cannot be overstated, as acknowledged by business owners—including those without active cover. Risk management is the biggest catalyst for insurance uptake. Other notable risks include political and economic instability, as well as business interruptions.
Generally, misinformation has made it difficult for business owners to obtain factual information about insurance solutions tailored to their businesses. A business owner in manufacturing may face different challenges from one in technology, beauty, logistics, or other sectors. These concerns present opportunities for insurance and financial players in risk management to engage with SMEs and curate custom solutions.
Policy documents are often littered with legal jargon and may appear intimidating and difficult to understand. This highlights the need for business communication to be simple and concise, encouraging greater adoption and uptake of insurance. Email is the most preferred form of communication, as acknowledged by business owners with insurance and those considering taking up policies in the future.
However, a gap exists in customer service. Client service satisfaction ratings are below 50 percent indicating that more work is needed to reach out to current and lapsed business owners regarding insurance matters.
Upon examining the pain points of insurance for small and growing businesses, cost stands out. The high cost of premiums appears to alienate business owners from exploring coverage options and benefiting from insurance products.
A second pain point is the claims process, which is often perceived as shrouded in mystery. Follow-up on insurance claims appears to be a significant challenge in the uptake of insurance. Poor experiences were cited as a key reason for dissatisfaction with the claims process.
Only 35 percent of business owners who had processed a claim mentioned that the process was smooth. This presents an opportunity for insurance providers to focus on awareness creation and engagement with business owners.
Do insurance providers understand the needs of small and growing businesses? Are business owners aware of the insurance solutions available for SMEs? The answer is a resounding no.
There is a low uptake of insurance products among SMEs. Notably, the few business owners with insurance policies have typically only insured their properties and motor vehicles.
The future of insurance for SMEs appears bleak. Sixty percent of business owners are not considering insurance in the future. For those who are, property insurance and fire coverage are the most pressing needs. Low uptake of insurance may point to a lack of awareness and limited sensitisation on the need for insurance.
Customised client portals are the preferred digital tools for managing insurance policies. Perhaps it is the ease of navigation or user-friendly self-service dashboards that have earned a positive satisfaction rating from 83 percent of business owners.
No single insurance provider is identified as the preferred choice for small and growing businesses. However, what is clear to SMEs is the need for variety in coverage options and multiple benefits. This is an opportunity for insurance brands to position themselves as the go-to solution providers for small businesses.
The future of insurance in Kenya is a kaleidoscope of collaboration. More sensitisation is needed on existing insurance products available to small and growing businesses, as well as consultative engagement to develop custom insurance solutions.
This includes a clear understanding of available products and collaboration with business owners to address existing gaps. A one-size-fits-all approach is not the answer.
Despite 62 percent of SMEs being open to recommending their current insurance providers, 58 percent believe that insurers are groping in the dark when it comes to understanding the needs of small and growing businesses.
Despite the challenges of insurance for small and growing businesses, there is positivity about projected growth. This necessitates the need for insurance providers to seek organic conversations and engagement that eventually build brand loyalty.
The writer is Director of Strategy, WYLDE International.
