Kenya has experienced an entrepreneurship boom in several sectors over the years.
The 2023 Economic Survey released by the National Treasury of Kenya acknowledges the role of micro, small and medium enterprises (MSMEs) in innovation, leading to job creation of approximately 16 million persons in 2023, in different industries across Kenya.
According to The Small Business Development Centers (SBDC), a program of USAID, it is estimated that 1.5 million MSMEs in Kenya are registered whereas another 5 million are unregistered and 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 in Kenya’s GDP, certain business risks stand in the way of growth.
An important conversation is the role of insurance in cushioning small and growing businesses from risks.
Business owners who have an active cover have insured either their businesses or vehicles. Fire insurance comes a distant third.
Half of these insurance covers are with a single insurance provider, perhaps an indication of preference towards certain providers.
Insurance companies in Kenya are quite loud in their branding thus providing ample visibility to potential clients including SMEs.
US stocks crash in shock over China’s advanced DeepSeek AI technology
Awareness of insurance providers is also not a challenge because 95% of business owners with active insurance covers are working with up to three insurance providers, with a majority of business owners acknowledging that their covers adequately meet current business needs.
The importance of insurance for SMEs cannot be gainsaid, as acknowledged by business owners including those without an active cover.
Risk management is a key concern and perhaps is the biggest catalyst towards insurance uptake. Other notable risks to SMEs include political and economic risks as well as business interruptions.
A reality whose end game is business closure, financial loss or litigation. Generally, misinformation has made it difficult for business owners to obtain factual information on insurance solutions for their businesses.
Risk management is largely misunderstood or generally shrouded in mystery. Different industries have different needs and requirements.
A business owner in manufacturing may have different challenges from another in technology, beauty, logistics, etc. The need for risk management is present and constant.
Therefore, these notable concerns present insurance and financial players in risk management with opportunities to engage and curate custom solutions.
Policy documents are often littered with legalese and may appear intimidating and difficult to understand. This may be a challenge, with only half of business owners admitting to being ‘very confident’ in their understanding of their policy document.
This highlights the need for business communication to be simple and concise, encouraging more 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 future.
Emails provide a reliable channel for client interactions, providing authoritative business communication that can be referenced in future.
This is the most preferred mode of communication by SMEs. A gap exists in customer service though.
Client service satisfaction rating is below 50% an indication that more work is needed in reaching out to current and lapsed business owners on matters of insurance.
Upon examining the pain points of insurance for small and growing businesses, cost stands tall. The cost of insurance premiums is prohibitive towards the uptake of insurance.
The high cost of premiums appears to alienate business owners from exploring options in covers and enjoying insurance products. This observation affects a business owner’s choice to work with both insurance companies as well as insurance brokers.
Cost was also identified as a desired consideration in proposed improvements in the insurance sector for SMEs. A second pain point is the claims process, perceived as shrouded in mystery.
Follow-up on insurance claims appears to be a big stumbling block in the uptake of insurance. Poor experience was cited as among the reasons business owners are dissatisfied with the claims process.
Only 35% of business owners who had processed a claim mentioned that the process was smooth. This then, is an opportunity for insurance awareness creation and engagement with business owners.
Do insurance providers understand the needs of small and growing businesses? Are business owners aware of insurance solutions available for SMEs? The answer is a resounding no.
This may possibly be the reason for apathy against insurance products. There is a low uptake of insurance products amongst SMEs.
Less than half of business owners have an active insurance policy at the moment. Of note is that the few business owners with insurance covers have insured their properties and motor vehicles only.
The future of insurance for SMEs appears bleak. 60% of business owners are not considering insurance in future. In fact the majority do not see a need for insurance.
For future insurance, SMEs are mainly concerned about property insurance and covers against fire, as the most pressing needs.
Low uptake of insurance may point towards a lack of awareness and limited sensitisation on the need for insurance. Customised client portals are the choice of digital tools for managing insurance covers.
Perhaps it is the ease of navigation or user-friendly self-service dashboards that have earned a positive satisfaction rating from 83% of business owners.
This is indeed a win for customer experience. Business owners have embraced digital tools for managing their policies hence better engagement with insurance providers.
No single insurance provider is identified as the choice insurer for small and growing businesses. There is no allegiance to brands, perhaps owing to the poor service delivery cited.
However, what is clear to SMEs is the need for variety in coverage options as well as multiple benefits.
This is an opportunity for insurance brands to position themselves as the ‘go-to’ solutions provider for small businesses. A starting point is understanding the needs of these businesses across different industries.
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 products.
Co-creation is encouraged to understand the needs of SMEs pertaining to insurance. This includes a clear understanding of available products, and collaboration with business owners to match existing gaps.
A ‘one-size-fits-all’ solution bouquet is not the answer. Despite 62% of SMEs being open to recommending their current insurance providers, 58% are of the opinion that insurers are groping in the dark where the needs of small and growing businesses matter.
These needs remain largely undefined and unmatched and exist as gaps.
Despite the challenges of insurance for small and growing businesses, there is positivity about projected growth, thus necessitating the need for insurance providers to seek organic conversations and engagement that eventually build brand love.
Are Kenyan insurance companies missing out on the SME opportunity? first appeared on Bizna Kenya
