Health, economic and social catastrophes including the recent coronavirus pandemic expose the vulnerability of individuals, families, businesses, economies, and nations to unforeseen but catastrophic risks. On a positive note, more people now acknowledge the benefits of insurance when faced with such adversities.
A recent survey by the Geneva Association, a leading global insurance think tank, shows forty per cent of retail customers consider their health and health insurance more important since the onset of Covid-19. Similarly, half of the small business owners have made insurance including medical schemes for employees a priority.
These are very interesting insights considering insurance is often not a priority for many people including business owners. The perception of insurance as an unnecessary expense is a bigger hindrance to the uptake of underwriting products compared, say, to affordability. But this is mostly due to a lack of information about the financial benefits of insurance in a modern economy.
The fundamental goal of insurance is to provide financial protection against life’s misfortunes. Insurance helps individuals and organizations to plan better for the future. Rather than focus on the monetary cost of the insurance cover, one ought to consider the negative consequences of not buying insurance like the inability to recover a stolen or damaged asset.
Insurance involves more than just managing life’s risks. Other benefits incude enhancing the ability of the insured party to cope with the shocks of loss of life, ill-health, and property thus increasing their financial resilience not to mention the peace of mind.
There is also a savings aspect to insurance since it entails putting aside some cash as consideration for financial compensation in the event of an accident or other insurable risk. But since it is impossible to predict with precision when calamity will strike, insurance becomes a necessity in life.
We must therefore get rid of this mentality that insurance is money down the drain if the insured risk does not occur. Such a mindset prevents people from buying insurance even when they can afford it. Focusing on the financial benefits of insurance as opposed to being a personal or business expense is an even better selling point.
At AAR Insurance, we focus on the value underlying an insurance product from the perspective of the client’s life, health, and business. Getting customers to understand the underlying value in insurance is at the heart of creating products that deliver better experiences for them.
A few practical examples will illustrate this point. In the case of families, a medical cover means preventing a financial disaster due to illness and the stress of having to hold fund-raisers to pay hospital bills for a loved one, especially in these tough times when the cost of living has risen.
For businesses, medical insurance for employees ensures staff can access quality healthcare to enable them to remain productive while the firm is able to attract good human resources.
For small businesses, insurance may be used as a security for loans thus acting as a guarantee to lenders that their money will still be repaid. The true value here is in expanding credit opportunities for small enterprises to grow. For professionals, an indemnity cover protects them from legal risks in cases of damages awarded by a court for negligence and other claims.
The bottom line is that insurance comes with multiple financial benefits and is not limited to compensation for losses arising from a broad array of risks.
Mr. Shigoli is the Managing Director, AAR Insurance Kenya.