Are insurance policies in Kenya a scam or not? This is a question that often evokes varying answers from the experiences of many Kenyans who have taken insurance policies. Many people feel that insurance policies in Kenya are designed to take and not give back.
But are they? Why are policies so complicated in Kenya? Are there any benefits to them? These are some of the questions that Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory, addresses;
Many people out here are frustrated losing money through insurance policies and not fully understanding why.
You will always find a few industry insiders stepping in to defend the importance of terms and conditions. That’s fair enough, but what’s missing is a clear breakdown of the real mechanics; the how, when, and under what circumstances those terms actually apply in practical and everyday scenarios.
Let’s be honest, most of these T&Cs are written in language that the average person cannot easily interpret. And most are never really well explained during the sale. And by the time reality hits, it’s usually when someone can no longer afford to continue with the policy or has realized they could have opted for a different product for the specific goal aimed.
This is the point at which the truth starts to surface. Because in a majority of these situations, one of two things will happen:
- The Sum Assured (what you expected to receive at maturity) changes, or
- The Surrender Value (what you can get if you exit early) is significantly lower than expected. These are the real issues people are rarely shown, in actual numbers – what these outcomes look like across different scenarios.
If we are serious about protecting consumers, then transparency shouldn’t begin at the point of sale, it should start at the point of marketing.
People need to see the full picture upfront, that is; the benefits, the risks, the trade-offs, and the exact financial implications of exiting early or defaulting. Not just polished Sum Assured figures that look enticing for the client.
This is especially for the 15, 20 year policies… Asking someone to commit to a 15 or 20- year policy without fully understanding it is a big ask. That’s a long-term financial obligation, not a casual decision.
And one thing needs to be made very clear: Insurance contributions are not the same as savings that sit in an account, waiting to be withdrawn at any time.
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We can romanticize it and make it look like savings and/or look like a savings tool but it’s not a savings tool. It’s a protection tool where the risks are being transferred to the company which pools funds of many other people to cover those risks.
You can’t just decide one day when you wake up that you want your money. Only when you get to the end of the contract term as signed can one receive what they signed for which also needs to be very very clear.
When signing a product for say Sh5,000 flat, you as the client should ask about the fees, part of which usually goes to the Insurance Policy-holder Compensation Fund (PCF) and the rest to administration.
So don’t do the math for the Sh5,000 flat. As a seller, please stipulate these to the prospects as well so that the client either decides to top up or reduce the figure of their anticipated Sum Assured.
Factor in the Tax reliefs as well. You signed a contract of risk transfer not a storage of money.
