Insurance: Security of the Uncertainties

Published on 27th March 2007

“I look forward to the day when Kenyans will understand and appreciate the work of insurance firms, and instead of us following them to insure their property and their lives, it will be them who will be looking for us,” observes Jackson Musumba, Director MAVIC Insurance Agency. After completing his high school education in 1995, Musumba did a marketing course and was employed in a law firm as a court clerk. While at the law firm, ALICO insurance company (a member company American Insurance Group - AIG) and now CFC Life assurance put up an advert calling for insurance agents. He applied for the job, passed the interview and enrolled at the College of Insurance. After the training he started working at ALICO as an insurance agent where he was dealing with life insurance policies only.


A.E: When did you leave ALICO?


Musumba: While still there at ALICO, I together with two of my colleagues teamed up and formed Jaora Insurance Agency so as to have a stint of general insurance. This was my turning point. I realized in general insurance there were more opportunities and in 2003, I left the life insurance division of ALICO in favor of the general insurance department (now AIG Kenya insurance company) under the same capacity. In 2005, I founded MAVIC insurance agency.


A.E: What is MAVIC Insurance Agency?


Musumba: This is an independent insurance agent that specializes on general insurance; that is insuring property. We are intermediaries between the public and insurance companies such as AIG, Lion Kenya, and Gateway among others. We are currently situated in Westlands- Nairobi.


A.E: There is a general perception that insurance firms “con” people. What is your take on that?


Musumba: Most people do not understand insurance contracts; they look at it from the face value and never take time to read through their policy documents. Their expectations are higher than expected and this, in some way, has been accelerated by some agents who take advantage of the client’s ignorance to exaggerate the insurance benefits. So in the event of a claim arising, the insured does not get the actual benefit he was promised leading to mistrust of insurance firms.


A.E: What do you think should be done to deal with such cases?


Musumba: There is need for educating the general public on insurance. Insurance firms can have open days where they can interact with the public and answer any questions they may have. The public should also be willing to learn more about insurance.


A.E: Insurance firms have been closed on several occasions. What could be the reasons behind their closure?


Musumba: Mismanagement, where the management does not control funds hence funds are directed to other ventures. Secondly, insurance firms thrive on premiums, therefore if the insured does not pay his premiums on time, or the insured pays on time but the broker takes long to remit the money to the insurance company, this affects the firm financially. This is because incase of a claim, then the firm is faced with a situation where it has to source for funds. Lastly, the re-insurance arrangement can lead to closure. This is where an insurance firm agrees to cover another insurance firm against all or a portion of the primary insurance risks underwritten by the ceding company under one or more insurance contracts which could be higher than it can deal with. In cases where there are no proper re-insurance treaties, then companies find it difficult to meet huge claims. This may lead to its closure.


A.E: What should a client consider when he wants to be insured?


Musumba: Look at the companies performance, there are statistics that are usually published by the Commission of Insurance. Look at the company’s ability to pay claims, how long it takes to compensate and the company’s stability. Unfortunately, most clients look at the premiums instead of the quality of service offered by the firm. They tend to go for companies with lower premiums without checking out if they can afford to pay a claim.


A.E: What challenges do you face?


Musumba: Delays in premium payment, some people pay premiums for the first few years and then stop paying. Competition is stiff especially from brokers since they are allowed to get insurance on credit unlike agents. The cost of running a business is quite high keeping in mind that agents are paid by insurance firms on commission. At times, we spend more money trying to get business than the commission we derive from the same business. Lastly, ignorance from the public is a major challenge. A client may be too rigid on a product, and I being a specialist on insurance, I know which product would suit him best. The client may give me a deaf ear, go ahead with what he believes is right for him but when he suffers a loss he will still blame me for giving him a wrong product.


A.E: How do you deal with these challenges?


Musumba: Failure to pay premiums leads to cancellation of the cover. On competition, we give personalized services, for example, in motor vehicle insurance, we value the client’s vehicle, handle the claims, follow up on repairs and call people within the policy period among others.


A.E: How do you contribute the growth of the economy?


Musumba: We pay taxes and offer employment


A.E: Which other people do you work hand in hand with?


Musumba: Property assessors/valuers, loss adjustors, investigators among others


A.E:  What’s your message to the public on insurance?


Musumba: People should look at insurance as a form of saving. It is the best security of the uncertainties. For example, if you insure your household goods, incase of theft or fire damage, the company will compensate you the damages up to a certain extent. Life insurance is the best security to your dependants. The only time an insurance agent is appreciated is when presenting the insurance claim cheque to a widow.


A.E: Describe a motor vehicle insurance process and what happens incase of a loss


Musumba: Incase of motor vehicle insurance, first we usually have the car valued. We then advice the client on the best cover to pick, this will be based on the client’s history. For example, a client may be a first time car owner, another may say that it is his fourth car and has been involved in several accidents. This will help us advice accordingly on the best cover to take. Incase the client suffers a loss, we inform the police, take the car to safety, inform the insurance company and advice the client on what to do. In most cases, the insurance company has a panel of garages, therefore the car may be taken to one of them and the assessor agrees with the mechanics on probable repair charges. The insured, thereafter pays part of the damages (usually called EXESS) which is normally about 2.5 percent of the value of the car, while the insurance firm meets the remaining costs.


If the car is written off, the investigator goes to the scene where the accident took place. He determines the number of injured victims, the extent of the damage and any other information that will help mitigate the loss. The insurance firm then sends a discharge voucher in favor of the insured. This is basically a voucher saying the insurance company is willing to pay the insured the sum insured less the policy excesses applicable.


A.E: Describe your working day


Musumba: I wake up at 5am and I am usually in the office by 6.30am. I go through the newspapers and at around 7.30 to 8.00am I check through my diary to see what should be done. I make calls, send letters and see clients’ up to around 5.00pm when I go jogging and call it a day. However, I am always on standby incase of any emergencies.


A.E: What is your advice to upcoming entrepreneurs?


Musumba: Business world has money, but not easy money. Business will always fluctuate. To succeed, one must sacrifice a lot be it in terms of money or time.

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