Safaricom Ventures into Device Insurance: Cost & Benefits

In a move to expand its service portfolio and tap into the burgeoning device insurance market, Safaricom has announced plans to partner with insurance companies to provide cover for millions of mobile phones. The initiative, led by Safaricom Insurance Agency Limited (Sial), aims to protect devices from risks such as breakage, theft, and other damages, leveraging a revenue-sharing model with insurers.

Safaricom’s strategy revolves around offering comprehensive device insurance tailored to Kenya’s growing mobile phone user base. The plan will cover devices ranging from Sh5,000 to Sh300,000, targeting risks such as:

• Accidental screen damage
• Liquid and fire damage
• Natural disasters like flooding
• Mechanical or electrical breakdown
• Loss or theft, including during international travel

The telco plans to structure the insurance offerings into three tiers:

1. Screen-Only Cover: Focused solely on accidental screen damage.
2. Screen and Damage Cover: Covers both screen and additional physical damage.
3. Comprehensive Cover: Includes screen damage, other physical damage, loss, and theft.

Safaricom had late in 2024 secured an insurance license from the Insurance Regulatory Authority (IRA), ending a four-year wait.

Key Operational Details

1. Seamless Claims Processing

Safaricom has set strict service delivery expectations for its insurance partners:

• 24-hour approval for claims after submission of necessary documents.
• Repairs completed within seven working days through authorised repair centres.

2. Device Replacement

Replacements will be handled exclusively through Safaricom shops and authorised partners, ensuring consistency in service quality.

3. Fraud Detection

To prevent fraudulent claims, insurers are required to deploy robust fraud detection systems and paperless claims submission processes, simplifying the experience for customers.

Safaricom’s device insurance journey began with a pilot phase, where it issued 117,000 policies under its Lipa Mdogo Mdogo program, generating premiums worth Sh22 million. These policies covered affordable devices sold under installment plans, with a total sum assured of Sh975 million.

Kenya’s smartphone penetration is substantial, with over 65.45 million mobile phones recorded at the end of 2023. However, insurance penetration remains below three percent, presenting significant room for growth. Safaricom, with its 33.5 million active users and over Sh1.74 trillion in monthly transactions through M-Pesa, is well-positioned to bridge this gap.

Safaricom’s approach relies on collaboration with insurance companies, leveraging its infrastructure and market reach. Key aspects of the partnership include:

• Revenue sharing, where Sial earns a commission from gross premiums.
• Utilisation of Safaricom’s system for distributing and managing policies.
• Co-creation of seamless, technology-driven solutions for customers.

Challenges and Opportunities

Challenges

• Fraud Risks: Ensuring claims are legitimate remains a concern, requiring sophisticated fraud detection systems.
• Turnaround Time: Meeting the 24-hour claim approval and 7-day repair deadlines will require high efficiency.

Opportunities

• Massive User Base: With millions of active users, Safaricom can scale its insurance services rapidly.
• Integration with M-Pesa: The telco can leverage its mobile money platform for seamless premium payments and claims payouts.
• Market Differentiation: Offering tailored insurance services enhances customer loyalty and diversifies revenue streams.

By partnering with insurers and leveraging its strong market position, Safaricom is set to redefine device insurance in Kenya. Its commitment to sustainability, operational efficiency, and customer convenience signals a strategic push to unlock new opportunities in a largely untapped market.

This initiative not only strengthens Safaricom’s service portfolio but also sets a benchmark for integrating technology and insurance, driving innovation in Kenya’s financial and telecom sectors.