At the height of Covid-19 infections, insurance firms tried to review clauses in existing policies to exclude pandemic-related claims. The move was, however, rejected by the Insurance Regulatory Authority because the pre-existing contracts did not exclude pandemic claims.
Liberty Life Assurance managing director Abel Munda spoke to the Business Daily on the Covid shocks on the industry, including massive cancellations of policies.
WHY DID THE INDUSTRY TRY TO REVIEW CONTRACTS TO EXCLUDE COVID CLAIMS?
The pandemic caught us unawares. This is something that happens once in like 100 years. The last time there was a pandemic was in early 1900s when there was Spanish Flu. So in most of our insurance clauses, there’s no exclusion of pandemic.
I remember the industry and the reinsurers were actually trying to rush to put a clause which will exclude the pandemic. The regulator [the Insurance Regulatory Authority] was not for it.
And so the industry came together and agreed that we were going to pay for pandemic claims. But something like a pandemic can actually wipe out a whole insurance industry if it keeps going.
WERE YOU HAPPY WITH THE REGULATOR’S DECISION?
I like the way the regulator handled it because they were constantly on watch of what was happening. I am sure if it came to a point where the industry was like collapsing given the weight of the Covid claims, then the government would have stepped in and created a fund. Thank God it didn’t come to that.
The industry was strong enough to contain the situation and pay the Covid claims.
HOW HAS LIBERTY BEEN EXPOSED TO COVID CLAIMS?
We settled claims of over Sh1 billion just in group life alone in 2021 when ordinarily, we would be settling about 40-50 percent of that. Some [deaths] were declared as Covid, some maybe not declared if they had pre-existing conditions.
It was quite high, but we were happy to do it because we are in the business of paying claims.
At such difficult times, we are happy to come in and assuage the plight of our customers. So we lived up to expectations.
DID THE CLAIMS POSE A FINANCIAL SHOCK TO THE COMPANY?
We feel Covid really exacerbated the level of claims in the last two years. The first year , it was more of retrenchment claims because we have that cover. Then in 2021, we now started experiencing claims on group life as a result of people who had passed on because of Covid.
We are at the tail end of that process because there are still claims which are coming through like in the first quarter and even today. But it is not an avalanche-like what we saw in 2021.
The company is, however, strong enough in terms of capitalisation to withstand those shocks. So we just paid those claims as they arose provided you submitted the requirements as they are.
HOW WAS LIBERTY AFFECTED IN TERMS CANCELLATIONS AND WITHDRAWALS OF POLICIES?
We had slightly over 2,000 policyholders drop. During the pandemic, things were quite difficult for many people. So we saw many policyholders cancelling or surrendering their policies. Some people lost jobs as there was a bit of retrenchment. Times were hard.
HOW HAS THAT CHANGED WITH RE-OPENING OF THE ECONOMY?
In the past six months, we have seen things easing off. Obviously, people have been called back to employment. But sometimes it is difficult for people to just reinstate their policies. So we must as a company consciously remind them that it is important to reinstate their policies.
ARE YOU IN TOUCH WITH THOSE WHO DROPPED OFF?
We have been running a reinstatement drive by calling people that if their circumstances have changed, they should seriously consider reinstating their policies so they continue with their cover. It is important that you don’t lose the value of your policies.
To that extent, we are not charging anything. We are allowing them to reinstate basically for free and not having to pay back premiums. Those are some of the little things we are doing to help the customers during these difficult times.
WHAT HAS THAT DRIVE YIELDED IN TERMS OF PEOPLE REINSTATING POLICIES?
We have reinstated about 600 out of the 2,000 who had dropped off. But it’s really important that people took care of themselves, got vaccinated and we are now seeing a return to normalcy.
We hope it continues this way although we are hearing stories of different strains [of Covid] coming up again. We hope that we will not be hit the way we were in the last two years.
BUT GENERALLY, INSURANCE PENETRATION IS VERY LOW. IT IS EVEN WORSE WHEN IT COMES TO LIFE ASSURANCE?
I have always believed there is a cultural aspect about it. It’s a fact that we have been used to having extended family kind of relations or safety net where we always take care of one another if something happens.
There has always been fundraising and that has now been worsened by people forming WhatsApp groups and requesting for help. That [fund raising] has a bit to do with low penetration because somebody does not see the need of life policy because they think if they pass on, ‘people will take care of me just like I have been assisting in taking care of people’.
DO YOU SEE THAT CHANGING GOING FORWARD?
We are seeing such circumstances changing as modernity sets in, and with it comes a certain level of individualism and urbanisation which now calls for you to protect yourself and your property in your financial plan.
Invariably this will continue. Life assurance sector continues to grow, but we are not growing at the same rate as the economy.
So you find that as a percentage of GDP —which is how they measure penetration — we are actually falling because we have not been growing at the same rate. Life assurance penetration is actually less than a percentage of GDP [as of 2020].
AT INDUSTRY LEVEL, WHAT IS DRAGGING GROWTH?
From my perspective, I am looking at product innovation. We really need to innovate around the customer and avoid the push [marketing] strategy.
Previously as an industry we have very much gone with the push strategy where you take a product to the market without being sensitive to customer’s requirements. I now see this is changing.
At Liberty, for example, we have recently formulated a new strategy where we went to the ground, surveyed the customers and tried to find out what they want before we crafted that strategy. The other challenge is innovation around distribution because the customer is very discerning and busy.
SO HOW ARE YOU MAKING IT POSSIBLE FOR THEM TO ACCESS THE PRODUCT EASILY?
It calls for a friendly customer portal. Most of us in the industry are innovating around that as well.
HOW ARE YOU ENSURING THAT INTERMEDIARIES ARE ALSO ALIGNED?
The same approach should also go for the intermediaries. What kind of portal do you have for them to make it easy to understand your product so that they are able to distribute it a lot more easily?
WOULD YOU SAY CUSTOMERS ARE NOW INFORMED ABOUT INSURANCE AND THAT IT’S THE DISTRIBUTION CHANNEL WHICH IS A CHALLENGE?
The general public is much aware of insurance, but do they know the product? There’s a gap between just being aware and consuming the product. That’s a gap we need to bridge. We are working on that in a concerted way with AKI (Association of Kenya Insurers) and even the regulator.