The Big 4. That is our current craze driven by the strategy of the current ruling party. What I like about it is that it is simple to remember and also shows some razor focus….4. Just 4 things and we are all good. In health care we have the UHC (another buzz word) which has different interpretations. Some say Universal Health coverage, others say Universal Health Care. But what is clear is that the intention of the Big 4 is to have all citizens access healthcare. That is a huge ambition which I totally am behind. I blogged about this in 2012 when Charity Ngilu attempted to pass legislation on the same. (https://torooti.wordpress.com/2012/05/09/nhif-the-difficult-path-to-universal-health-in-kenya/)
When UHC is discussed the players involved are mostly government (national and county) with the NHIF seen as a key player. Is there a role of private sector especially private medical insurance? Definitely!
Some initial back ground. The Kenyan private health insurance collected
Kenya shillings 38 Billion worth of premiums in 2017. This is 30% of total direct premiums collected (https://www.ira.go.ke/images/docs/2017annual/Insurance-Industry-Annual-Report-2017.pdf page 148) . From the 2017 Kenya IRA report, the companies that primarily sell medical insurance policies (>80% of total portfolio) suffered losses. ( https://www.ira.go.ke/images/docs/2017annual/Insurance-Industry-Annual-Report-2017.pdf page 126) This was also true for those companies selling public service insurance. You would think medical insurance business is profitable. It is a fact, medical insurance is not profitable. In Kenya. Many attributes have been given for these losses from increasing medical expenses by hospitals and Doctors to Fraud. However many do not see that the reason for the losses are mostly attributed to internal factors. The rain started beating medical insurance business when medical insurance businesses copy and pasted operations from general insurance. The model of operating medical insurance has also hardly changed over the years.
Is it not logical to change in the face of losses year on year? Well some more back ground. Medical insurance business, like general insurance business, is traditionally a risk averse business. Change is abhorred. The reasons are quite valid for this paranoia to change. One is that these organisations hold clients funds and changes that can create more risk can hit the bottom line directly and indirectly. If you look at the private medical insurance space in Kenya, the companies fight for the same clients year in year out. The products sold by the companies resemble each pother. These companies do not differentiate each other. That is why well known business advisor, Sunny Bindra in 2016 warned of an impending disruption of the insurance industry.
To give some credit, the Kenyan insurance companies have been having some flashes attempts to change. Jubilee Insurance seems to the most active in showing their attempts to use technology to help improve their customer experience and hopefully reduce costs ( https://www.businessdailyafrica.com/analysis/ideas/Why-innovation-is-key-to-growth-of-insurance-industry/4259414-4332422-nqv22u/index.html ). Resolution Insurance launched several products using technology to help enrollments ( https://www.nextinsurance.co.ke/blog/resolution-partners-with-insureafrika-launch-psv-car-insurance-kenya/) and using new channels to get clients e.g. personal accident covers bought via the mobile phone (https://www.resolution.co.ke/resolution-insurance-unveils-accident-cover-psv-users/) . One other notable attempt is by APA insurance who are collaborating with IBM to automate claims settlement ( https://www.standardmedia.co.ke/business/article/2001269975/apa-adopts-technology-for-quicker-claims-processing).
These attempts are notable but seems sporadic,disjointed and at times not strategic. They are launched in a frenzy and then fizzle out. This is repeated over and over. However these steps are critical.
I hate cliches but here are what I consider are the 5 (cliche alert) things I think private health insurers need to do to first avoid making losses, start making money and start playing a role in the Big 4 agenda (yes,another cliche statement).
- It starts at the top: If your board and top management are stuck in the old ways of doing things your company will die and will cease to exist. Also the board needs to give direction on what is their core business If you do not get this right, then do not bother with the rest of my advise because they will not work. My advise is get a mix of industry veterans and young blood with experience especially from tech companies and finance organisations like banks to be in your board and top management. Insurances need to take a cue from banks who have been much quicker to respond to threats from internal stagnation and emergence of technology companies like Safaricom.
- Change and Get lean: Stop running like traditional insurance companies.Treat(pun intended) medical insurance with its unique challenges and opportunities. For one, the largest departments in health insurance business are back office operations that deal with underwriting( on boarding clients) and claims settlements. These operations can easily be digitized and/outsourced. This can be a start to stem the bleeding in the books (too much blood has been lost already) . I know people hate the idea of retrenching but it does not have to come to that. These experienced employees can be re-deployed in improving customer engagement which in healthcare is complex.
- Use technology: When I worked in health insurance the big projects involved acquisition of “core” systems. These were and still are very expensive and inflexible systems. The horror stories from the sector are there up-to date. No one wants to admit openly that these systems are not serving their needs. How can a 10-15 year old inflexible system adapt to the need of a client in 2019? By the time your requirement has been reviewed and built by the core system provider it will have taken several years and several thousand dollars. By that time will the client’s need be the same? Today technology is getting cheaper,faster,more secure and flexible. Why not take advantage of such services? One example hopefully illustrates this. IT departments in most local organisations manage their own data centres and servers. The incur costs of setting up, maintenance and licences of software to run the servers. However, by using cloud services such as Amazon and Azure where the costs and head ache of managing servers ( up-time, security,latest software) is borne by the service provider at a fee per use (of course). This is what most technology companies do. This allows them to focus on the core business. Again I ask what is the core business of insurance companies? There are technology solutions for pretty much every part of the medical insurance value chain. The challenge is how to strategically use these technologies. Also do not use technology just for the sake of it. That is just tacky. One great example of technology use was Linda Jamii. I was a keen follower of this product because it was the future of how medical insurance should run. I even blogged about it in 2013 (https://torooti.wordpress.com/2013/12/11/micro-health-insurance-in-kenya-linda-jamii/). Sadly the product died. But it did not die from issues of technology. It died because of all the other 4 items I talk about in this blog.
- Start small: Since insurance businesses are risk averse, I suggest starting a small team independent from the other organisation departments (but work with them) and report to the CEO directly. The team’s main goal is to develop a model of how the future company will look like. Let this team experiment with customer products, operations and other ways of working and fail. Trust me they will be met by failures at the start. However slowly it will all make sense. This requires patience, and nerves of steel from the board as this process cannot be rushed. You have to go through the painful experience of re-engineering your business. Eventually the work of the team will align with the organisation (yes, I am eternal optimist) . Some potentially great companies have been incubated in big companies. One good example is Finserve which is a wholly owned subsidiary of Equity Bank Holdings. I predict they will be a big player in the fintech space if they are allowed to run independently. I may even go as far as say it will be bigger than the main banking business in the next 10 years. Another good example is Carepay which was incubated as an mwallet project for almost 3 years before it was created to be the platform that hopes to transform the health payment ecosystem. (https://www.edgemagazine.co.ke/2016/06/27/carepay-promoting-healthcare-inclusion-through-mhealth-wallet/).
- Collaborate: It is time to collaborate. You cannot do it alone. Old ways of doing business meant that companies wanted to do everything and never got good at their core business. Now with businesses shooting up left right and center it is important for the company to leverage on these organisations to achieve its objectives. Getting better at collaborating means that you achieve your target faster at a lower cost( most important). Collaborations can include business associations. not necessarily businesses.