CENTRAL BANK OF KENYA
Message by
PROF. NJUGUNA NDUNG’U
GOVERNOR
and
THE CHAMPION OF FINANCIAL EDUCATION IN KENYA
Financial Education Partnership Champion’s Breakfast Meeting with the
Insurance Sector
Crowne Plaza Hotel, Nairobi
Monday, 20th September 2010

Mr. Sammy Makove, Chief Executive Officer, Insurance Regulatory
Authority;
Mr. Tom Gichuhi, Chief Executive Officer, Association of Kenya Insurers
(AKI);
Ms. Bilha Maina, Project Manager, Financial Education, FSD Kenya;
Distinguished guests;
Ladies and Gentlemen:
I am honoured to speak at today’s breakfast meeting with the representatives of the
insurance sector; this is a rare opportunity to highlight the status of financial
education in Kenya as it concerns the insurance industry, an integral part of the
financial sector.
I am indeed grateful to the FSD Kenya for hosting this gathering and to all
participants for the honour of your presence.
Ladies and Gentlemen: My brief this morning is on financial education and
consumer protection in relation to the insurance industry in Kenya. For a contextual
background, allow me to recap the latest statistical highlights on financial inclusion
in general and specifically insurance services, as reported in the 2009 National
Financial Access Survey.
• As at June 2009, 32.7% of the Kenyan population had no access to any financial
services. This was 6% drop from the 38.4% reported in 2006;
• The survey indicated that in 2009, only 7% of the Kenyan population used
insurance products and 91% of the population have never used insurance
products;
• In absolute terms, out of a population of 38 million, those using insurance
products are approximately 1.3 million only;
• 48% of the population is ignorant of the meaning of insurance and its usefulness;
• The highest usage of insurance products was with the government-run National
Hospital Insurance Fund (NHIF) and the National Social Security Fund (NSSF),
serving 4.2% (777,000) and 2.9% (536,000) of potential financial services
consumers, respectively. In strict terms, however, these two are effectively
statutory deductions rather than insurance arrangements for risk mitigation
entered into voluntarily. Their apparent high “use” so to speak, may be attributed
more to the need to comply rather than to individual volition to mitigate against
risks they face on their day to day activities; and
• According to the Insurance Regulatory Authority (IRA), the total life insurance
policies in force as at the end of 2009 numbered just under 450,000 while all
other policies, through extrapolation, were estimated at less than one million.
Ladies and Gentlemen: From the foregoing, the general picture emerges: A major
challenge facing the Kenyan financial sector in general and the insurance industry in

particular is the lack of awareness by the target market. The statistics indicate that
insurance, as a financial service, is yet to be recognized as an available riskmitigation tool by much of the population. Whereas life’s risks are known from
practical experience, not many are aware that insurance is available as a viable
solution to those risks. In times of financial crises caused by occurrence of
misfortunes, many continue to rely on traditional sources of help such as family and
friends, sale of physical assets, personal savings and emergency borrowing –
including the dreaded shylocks. We need to parade the insurance products and the
potential risks they mitigate.
Ladies and Gentlemen: As players in the insurance sector, it is your task to
sensitize your prospective customers on your products not only as a marketing
strategy but as part of your corporate social responsibility. This will of course
translate to more business in future when the prospective customers concretize your
messages. In this regard, I encourage you to come up with sustained efforts to
enlighten the public through provision of credible, relevant and adequate guidance
on the role and usefulness of insurance as a risk management service.
As you know, an enlightened customer is empowered, and business is thereby made
easier and faster when dealing with them. Certainly, the returns will not be reaped
overnight. However, the potential long-term business gains make it merit your
investment.
Ladies and Gentlemen: The insurance sector regulator, IRA, through its
participation in the Domestic Financial Sector Regulators Forum, is part of our
collective efforts as regulators of the financial sector to demystify financial services to
the public. The Forum has resolved to jointly undertake financial education activities
to raise awareness on our various roles towards the economic development of our
country. The financial sector is expected to play a critical role in realizing the
country’s aspirations under Vision 2030 of becoming a middle income country by
2030.
The increasing inter-linkages between players in the various sub-sectors in the
financial sector informed the coming together of the regulators to facilitate our
collaboration in our various activities which are generally geared towards a sound,
efficient and stable financial sector. For us to achieve these objectives, our consumers
must fully appreciate what we do. The best way to do this is through financial
education.
Ladies and Gentlemen: Allow me now to briefly share with you some few aspects
which you need to consider as you rollout your various awareness and sensitization
campaigns. These are those aspects that determine the publics’ perception of
insurance as an industry, and that affect your collective reputation.

• Emphasize on the usefulness (positive benefits) of insurance to the
insured- The real benefits of the product as a value-proposition to the prospects
should be emphasized. The prospects need to be convinced of their status as the
primary beneficiary in any contract of insurance, in order to be volitionally
interested in the product. Financial education should be aimed at eliciting the
said conviction and interest.
• Cost-effectiveness- Insurers should be mindful of the low-income status
of most of the uninsured public in Kenya and tailor their offerings accordingly.
The micro-insurance initiatives launched recently are a commendable step in this
direction.
• Simplification of product structure and procedures – products
proposals, and financial education content should be straightforward, and in
language plain enough for the ordinary customer to follow.
• Transparency, integrity and credibility – The consumer protection
diagnostic study undertaken in 2010 showed significant customer dissatisfaction
with the manner in which insurance products were marketed as well as the
tedious and protracted claims process. For a service based on trust, these
observations create a negative perception in prospective customers, and
undermine their confidence. To avoid this, the industry should be seen to operate
transparently and above board. As for any financial service, associations that
portray the industry in a negative light need to be avoided. Financial education
initiatives will need to clearly lay down the standards of integrity and consumer
protection which the insuring public should expect of all players in the industry.
Ladies and Gentlemen: I need not belabour the benefits of financial education to
your business. However, let me reiterate that the widespread public mistrust of
insurance providers and their products could hinder the effective implementation of
a financial education strategy in this sector. Consumer protection is therefore a
requisite step to the implementation of the strategy. The ongoing work by the IRA to
adopt standardised policy wording for the industry should be fast tracked. I also
suggest that you consider introducing transparency regulations where there is a
uniform disclosure regime for pricing and policy conditions particularly conditions
related to claims settlement.
I would also remind you the benefits of being customer centric. Your products and
services will elicit adequate interest if they are tailored towards the needs of the
customers. To effectively do this, you need to be aware of the segments in the market.
I am informed that there are three key population segments in our market that you
need to be aware as you develop your products:

• The underserved or unbanked – who largely need short term insurance products
to manage emergencies brought on by bereavement, crop failure etc.;
• The middle income disciplined planners – who are the more served group in
insurance but need to develop skills to seek the right advice, negotiate and
advocate for their rights; and
• The elite but sometimes risky banked segment – who require financial planning
tools for wealth generation, on which to fall back on in old age.
In conclusion, Ladies and Gentlemen, for financial institutions in Kenya to secure
their future, they need to remain conscious to the needs and sensitivities of the target
market. The current level of financial exclusion in Kenya indicates that financial
services in general, and particularly insurance, have largely not tailored their
products to the needs of the market. In this regard, concerted action is therefore
needed from all players in devising sufficient incentives that will raise interest and
participation in insurance by the currently uninsured public. Both actual and
prospective customers should be adequately sensitized to appreciate how insurance
may be beneficial to themselves so as to encourage sustained volitional participation.
I take this opportunity to urge you as the players in the insurance industry to
continue to actively participate and support the financial education partnership
spearheaded by FSD Kenya aimed at the development and implementation of a
comprehensive national strategy for Kenya.
With these few remarks, Ladies and Gentlemen, I thank you all for your
attention.