Feasibility Study for Property Microinsurance Study for Property Microinsurance ... Ultimately, the goal of the feasibility study is two‐fold – a ... market making product line

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<ul><li><p>FeasibilityStudyforPropertyMicroinsuranceExploringtheMarketOpportunityforHousing</p><p>andPropertyInsuranceinKenya</p><p>June2015</p><p>publicversion </p></li><li><p>i</p><p>TableofContentsListofTables................................................................................................................................................iii</p><p>ListofFigures...............................................................................................................................................iii</p><p>AbbreviationsandAcronyms.......................................................................................................................iv</p><p>Foreword.......................................................................................................................................................v</p><p>ExecutiveSummary......................................................................................................................................vi</p><p>StudyMethodology.......................................................................................................................................x</p><p>OrganizationoftheReport...........................................................................................................................x</p><p>1 KenyanMarketCharacteristics.............................................................................................................1</p><p>1.1 FinancialinclusioninKenya..........................................................................................................1</p><p>1.2 Insurancemarket..........................................................................................................................1</p><p>1.2.1 Overview...............................................................................................................................1</p><p>1.2.2 Insurancepenetration...........................................................................................................2</p><p>1.2.3 Microinsurancemarket.........................................................................................................4</p><p>1.3 Propertymicroinsurance..............................................................................................................7</p><p>1.3.1 Globalpicture........................................................................................................................7</p><p>1.3.2 Kenyapicture........................................................................................................................9</p><p>1.4 Regulation...................................................................................................................................11</p><p>1.5 Housingmarket...........................................................................................................................12</p><p>1.5.1 Housingsegmentation........................................................................................................12</p><p>1.5.2 Housingfinancemarket......................................................................................................16</p><p>1.5.3 Securityoftenure...............................................................................................................17</p><p>2 Demandsideinsights..........................................................................................................................18</p><p>2.1 Demandsideresearchapproach................................................................................................18</p><p>2.2 Valueandfeaturesofhomes......................................................................................................18</p><p>2.3 Propertyriskexperienceandperceptions..................................................................................19</p><p>2.4 Currentriskmitigationstrategiesanddamagerecoverymechanisms......................................25</p><p>2.5 Insuranceperception..................................................................................................................27</p><p>2.6 Indicativeinsightsonwillingnesstopayforpropertycover......................................................29</p><p>3 Distributor/aggregatoranalysis..........................................................................................................30</p><p>3.1 Banks...........................................................................................................................................31</p><p>3.2 Microfinanceinstitutions............................................................................................................32</p><p>3.3 Savingsandcreditcooperatives(SACCOs)................................................................................33</p><p>3.4 Mobilenetworkoperators..........................................................................................................33</p><p>3.5 NGOsandcivilsocietyorganizations..........................................................................................34</p></li><li><p>ii</p><p>3.6 Developers..................................................................................................................................35</p><p>4 Productconceptsandpotentialinnovations......................................................................................36</p><p>4.1 PropertyinsuranceAccessFrontier............................................................................................36</p><p>4.2 Emergingproductconcepts........................................................................................................37</p><p>4.2.1 Fireinsurancelinkedtohousingmicrofinance...................................................................40</p><p>4.2.2 Enhancedcreditinsurance:Protectingbusinessandincomegeneratingproperty.......40</p><p>4.2.3 Titleinsurance.....................................................................................................................41</p><p>4.2.4 HomeSaveImproveProtect...........................................................................................42</p><p>4.2.5 Homebusiness....................................................................................................................43</p><p>4.2.6 Roomcover.........................................................................................................................44</p><p>4.2.7 Standalonebuildingsforrenters.........................................................................................44</p><p>4.2.8 Disasterrisk.........................................................................................................................44</p><p>4.2.9 Constructionwarranty........................................................................................................45</p><p>4.2.10 Lowcostclaimsassessorconcept.......................................................................................45</p><p>4.2.11 Portfoliocover.....................................................................................................................45</p><p>4.3 Marketingconsiderations...........................................................................................................46</p><p>Conclusions.................................................................................................................................................47</p><p>References..................................................................................................................................................49</p><p>Annex1:GlobalStandalonePropertyProducts.........................................................................................51</p><p>Annex2.GlobalCreditLinkedPropertyProducts......................................................................................55</p><p>Annex3.KenyaStandalonePropertyProducts..........................................................................................57</p><p>Annex4.KenyaCreditLinkedProducts......................................................................................................59</p><p>Annex5.StakeholdersInterviewed............................................................................................................60</p><p>Annex6.BreakdownofHouseholdSurveyRespondents...........................................................................61</p></li><li><p>iii</p><p>ListofTablesTable1:KenyaInsuranceMarketKeyStatistics...........................................................................................2Table2:RegisteredInsuranceCompanies,Brokers/AgentsinKenya..........................................................2Table3:InsurancePenetrationComparedtoOtherFinancialServices,acrossDemographicSegments....3Table4:CommonDistributionChannelsbyProduct....................................................................................6Table5:InsurancePenetrationamongstAdultsperAggregator.................................................................6Table6:InsuranceCompanyChallengesaroundMicroinsurance..............................................................11Table7:StylizedHousingSegmentationforKenya....................................................................................14Table8:ProfileofSurveyedOwnersLivinginUrbanPermanentHomes..................................................19Table9:RisksIdentifiedfromFinAccess2013............................................................................................20Table10:MajorCopingStrategiesforRiskyEvents...................................................................................27Table11:IllustrativeLossEconomics..........................................................................................................29Table12:FinancialServiceProviderChallengesinHousingLending.........................................................31Table13:MInsuranceChallenges..............................................................................................................34Table14:SummaryOverviewofProductConcepts...................................................................................39Table15:ExamplesofStandalonePropertyMicroinsuranceProducts(ExcludingKenya)........................51Table16:ExamplesofCreditlinkedPropertyMicroinsuranceProducts(excludingKenya)......................55Table17:ExamplesofKenyaStandalonePropertyMicroinsuranceProducts...........................................57Table18:ExamplesofKenyaCreditLinkedPropertyMicroinsuranceProducts.......................................59</p><p>ListofFiguresFigure1:Insurancevs.OtherProducts(asof2013).....................................................................................1Figure2:PercentageofAdultsCoveredbyInsurance..................................................................................3Figure3:PercentageChangeofInsuranceCover,20062013......................................................................4Figure4:MicroinsuranceValueChaininKenya...........................................................................................5Figure5:TypesofHousingStructuresinKenya..........................................................................................13Figure6:PermanentStructuresbyIncome................................................................................................13Figure7:LowIncomeHomeConstructionMap.........................................................................................15Figure8:Distributionof(SelfReported)HouseValuesfromtheSurvey...................................................19Figure9:ImpactofRiskonHouseholdIncome..........................................................................................20Figure10:IncidenceofPropertyDamage,acrossVariousProperties,fromSurvey..................................21Figure11:CauseofPropertyDamageActuallyExperienced......................................................................21Figure12:PerceivedBiggestRiskstoHome...............................................................................................22Figure13:DifferencesinPropertyLossExperience(Urban/RuralandStructureQuality).........................23Figure14:ComparingCauseofPropertyLossExperienceacrossUrban/Rural.........................................23Figure15:CurrentCopingMechanismsforLargeHouseholdShocks........................................................26Figure16:PropertyInsuranceAccessFrontierforKenya...........................................................................37Figure17:PropertyInsuranceProposedLinkagesforKenya.....................................................................38 </p></li><li><p>iv</p><p>AbbreviationsandAcronymsBFA:BankableFrontierAssociatesCatnat:NaturalcatastrophescoverCIC:CooperativeInsuranceCompanyofKenyaCISF:CenterforInnovationinShelterandFinanceCSO:CivilSocietyOrganizationFGD:FocusGroupDiscussionFLEXA:Fire,Lightning,Explosion,AircraftdamagecoverFSDK:KenyaFinancialSectorDeepeningProgrammeHFHI:HabitatforHumanityInternationalHH:HouseholdHMF:HousingMicrofinanceIRA:InsuranceRegulatoryAuthorityofKenyaKCB:KenyaCommercialBankMFI:MicrofinanceInstitutionMNO:MobileNetworkOperatorsNACHU:NationalCooperativeHousingUnionNGO:NonGovernmentalOrganizationsSACCOs:SavingsandCreditCooperativesSCBF:SwissCapacityBuildingFacilitySMME:Small,MicroandMediumEnterprisesNHIF:NationalHospitalInsuranceFundNSSF:NationalSocialSecurityFundExchangerateused:1.0USD=91.4Ksh.(asof5April2015)Citation:Leach,J.,Abrams,J.,Yoder,S.(2015).FeasibilityStudyforPropertyMicroinsurance:ExploringtheMarketOpportunityforHousingandPropertyInsuranceinKenya.PreparedfortheSwissCapacityBuildingFacility. </p></li><li><p>v</p><p>ForewordTheKenyaPropertyMicroinsuranceFeasibilityStudyisresearchcommissionedbyHabitatforHumanityInternational'sCenterforInnovationinShelterandFinancetodeterminethemarketopportunityforpropertymicroinsuranceinKenyaandexploreproductconceptsanddistributionopportunitiesthroughKenyaCommercialBank.ThestudywassupportedbySwissReandimplementedbyBankableFrontierAssociates(BFA),withfundingfromtheSwissCapacityBuildingFacility(SCBF).Asastandalonepolicy,propertymicroinsuranceisuncommoninAfrica,numberingroughly0.9millionprimaryandsecondarypoliciesasof2013.TheprimaryimpetusforthisfeasibilitystudyisassessingthefeasibilityofinsurancestrategiesthatcouldfillthisgapandimprovelowincomepopulationsaccessinKenyatoformalriskmitigationsolutionsforhousingandpropertyloss.Ultimately,thegoalofthefeasibilitystudyistwofoldacomprehensivereport,employingdeskbasedandfieldresearch,that:</p><p>1. ProvidesrecommendationstoKenyaCommercialBankandotherfinancialserviceprovidersthatwillleadtodeveloping,pilottesting,andupscalinginnovativepropertymicroinsuranceproductsthatmeetthefinancialneedsoflowincomehouseholdsonacommerciallysustainablebasis.</p><p>2. ServesasaresourceforotherdevelopmentandindustryactorswhoareinterestedinincreasingpropertymicroinsurancepenetrationinKenya,offeringrecommendationstofacilitators,suchasHabitatforHumanityInternational(HFHI),onhowbesttosupportKenyaCommercialBankandotherdistributionpartners.</p><p>Since1976,HabitatforHumanityInternationalhashelpedmorethan5millionpeopleconstruct,rehabilitateorpreservehomes.Inrecentyears,HFHIhasbegunexploringwaystocatalyzethehousingmarketandimproveaccesstoshelterforlowincomehouseholdsusingmarketbasedapproaches.Tothatend,HabitatlaunchedtheCenterforInnovationinShelterandFinanceasan...</p></li></ul>

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