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Property insurance: Your fallback plan

by kenya-tribune


While the country has witnessed a rise in home ownership and property development over the years, the uptake of insurance in the real estate sector has not particularly matched the growing figures, an industry professional says.

Overall, insurance penetration in Kenya stood at 2.71 per cent in 2017, compared with 2.75 per cent in 2016, according to the 2017 Insurance Industry Annual Report released by the Association of Kenya Insurers (AKI).

Mr Karanja Kabage, the group chairman of Pacific Insurance Brokers (EA) Ltd, reveals that Kenya has one of the highest numbers of insurance professionals, comparable to Nigeria and South Africa.

 “We have highly trained manpower in this sector, but as to the uptake, we are still in the woods, for reasons such as people having less disposable incomes or ignorance on the need for insurance. That is quite evident when you look at statistics of the people who have insured their properties in the country.”

Mr Kabage noted that a contributing factor for the low uptake of property insurance is that Kenya does not impose compulsory insurance for property owners, as is the case with motor vehicle ownership.

He, however, stressed the need to provide incentives as one way of motivating property owners to embrace insurance.

“Incentives, coupled with serious marketing by insurance companies to create better awareness of the need of taking up insurance will definitely bring about consciousness to the public,” he noted.

That’s because one of the reasons for low insurance is ignorance — people are not aware of the other available opportunities to insure.

“Many only think of insurance in moments of calamities, for example, a terrorist attack, or when a building has been razed to the ground by fire. At that point, people can relate with the need for insurance. Otherwise, they will not on voluntary basis insure — unless there is a mortgage,” Mr Kabage adds.

Mr Kabage lists fire, floods, earthquakes and terrorism as some of the reasons people should consider insuring their properties.

“Insurance is your fallback in such instances,” advised Mr Kabage, who is also an advocate of the High Court.

He also observed that insurance companies form a useful path to a nation’s development, through mobilisation of savings.

“Any country that wants to develop should look into what is known as mobilisation of savings. Insurance companies are fantastic vehicles for such undertakings. In other words, the more insurance companies are able to insure people, they’ll be having enough money which can go towards housing, purchases of bonds, building the assets of insurance companies and therefore building the wealth of the nation.”

In addition, Mr Kabage suggests that the government come up with legislative incentives for people, noting that in the long run, this would be one way of mobilising capital.

For homeowners, landlords and renters, AKI puts a strong case for the home insurance package. AKI says that home insurance, also known as domestic package insurance, provides the protection of property in a home against theft, damage, fire, floods and natural disasters.

Home insurance combines insurance for the building or structure, household contents, all the way to portable items such as mobile phones, watches, spectacles, laptops and jewellery that you own. According to AKI, the cover can also be extended to cover liabilities against domestic workers and third parties.

Other than the domestic package, various insurance companies offer packages that cover commercial premises.

Commercial buildings, which are covered in this package, may refer to buildings such as school buildings, shops, malls, office blocks, hospitals, supermarkets and places of worship.

Mr Kabage also urges that Kenyans — particularly business owners — consider consequential loss insurance, which is the indirect loss that results from an insured party’s inability to use business property or equipment.

“In a business property, if for example the building caught fire, the insurance company can pay for the loss. Remember, though, that in this building, there was business going on, and so there is a loss to the business owner. That’s why one should insure for that kind of eventuality.”

Generally, it would be a good idea for persons seeking to invest in property to think of insurance, Mr Kabage notes, as this would act as a fallback in the event of a calamity. He suggests that property owners can even consider a group approach when purchasing insurance.

“If it is done on a group basis, it can be very inexpensive. For example, if you have a gated community, instead of a person going to purchase insurance alone, the community can buy it under its management, and the insurance companies would give them a good discount.”

The same group advantage extends to the settling of claims, he adds, noting that insurance companies would not afford to either delay the settlement of the claim or decline paying the claim.

“Take advantage of what we call the law of large numbers,” Mr Kabage says. “It helps when you have a situation of that nature. It’s good for people to buy insurance when they are in gated communities or flats because it is available as a package,” he concludes.

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