The majority of Kenyans do not have access to health insurance due to prohibitive pricing and an outdated coverage model that predominantly caters to formally employed individuals. Sam Agutu is revolutionizing the health insurance industry by leveraging mobile technology platforms to allow individuals to electronically save and pay for healthcare in an affordable and convenient manner.
The New Idea
Sam is giving low- to middle-income earners, underserved by the current health insurance market, the ability to access affordable and quality healthcare services. He does this by leveraging the existing reach and efficiency of telecommunications infrastructure to enable anyone with a mobile phone to use it in combination with accessible smart card, and electronically save for healthcare in a convenient manner, and in affordable amounts. Sam is getting private healthcare providers to fix their charges at a much lower price point and is using a paperless process to revolutionize the speed and efficiency with which claims are processed and remittances are made to service providers.
Sam is building the architecture that will make affordable and quality healthcare accessible to 95 percent of Kenyans currently uncovered by conventional health insurance models, and his game changing idea is transforming the focus of health insurance in Kenya from institutional to individual membership. He is making it possible for health coverage to be shared among friends and family, and for people and institutions to contribute to the coverage of any individual(s) directly. In addition to transforming the health insurance sector, Sam is looking to change individual behavior. By making quality healthcare more accessible and affordable, he wants to improve the health seeking behavior of Kenyans. Sam finds that more people are making the choice to seek professional medical care earlier, rather than self-medicating or waiting until their conditions have deteriorated.
Only 5 percent of Kenya’s population has public health insurance under the National Hospital Insurance Fund (NHIF), which relies on contributions from formally employed Kenyans to cover health benefits for members and their dependents. Only 2 percent can afford private health insurance for quality healthcare at designated private health facilities. Since 85 percent of Kenyans do not fall within the formal employment bracket and do not earn enough to afford private health insurance, some thirty-four million people are not covered by any form of health insurance, and may only access healthcare services that operate on a cash-for-service basis.
This alarmingly low level of health insurance coverage has persisted for many years because the previous health insurance model was designed to reach a small, specific and easy-to-reach market of formal employees. Insurance providers prefer to work with formally-employed individuals because it is easy to collect their premiums; their employers make an automatic monthly deduction from salaries which are sent to the insurer. In fact, the ease with which remittances flow to the insurer once an account is acquired is so enticing that the entire health insurance industry will clamor for a share of the few who fall in this category every year. Given current practices, other market segments do not seem viable to the traditional insurer. More importantly, there is no other insurance provider that demonstrates the possibility of reaching other market segments.
Private providers offer the highest quality and most reliable healthcare but uninsured Kenyans cannot afford these services. Public hospitals, clinics and health centers account for 40 percent of Kenya’s healthcare space and should provide subsidized and, therefore, affordable healthcare services to the majority of Kenyans—whether covered by insurance or not. However, the reality is that they are unable to provide quality services due to a serious lack of supplies and staff capacity. This lack of capacity greatly undermines the level of efficiency of public health centers. It is common to find hundreds queuing at a health center—all waiting to be seen by one doctor. Doctors in public health centers often hold another job at a private hospital, clinic or pharmacy that pays more and, therefore, takes up most of their time. Patient’s walk long distances to reach such centers and can wait up to four days to receive treatment. Even those with insurance must arrive early to see a doctor. Due to inadequate drug supplies, patients will often receive a written prescription to take to a private pharmacy that charges a fee. Citizen organizations (COs) health centers account for 30 percent of the healthcare space and provide the best balance between price and quality. However, their dependence on grant money makes these unsustainable and, therefore, inconsistent over the long-term. Private healthcare providers account for the other 30 percent and these are the most sustainable and most efficient operations. They attract the best doctors and provide quality healthcare. The problem is that they are hardly affordable to the average Kenyan and, by virtue of their pricing, almost exclusively serve middle- to upper-income populations.
Given that 60 percent of Kenyan’s own a mobile phone (estimated to grow to 90 percent by 2015), Sam knew that mobile technology could be the perfect platform to get health insurance to those Kenyans not currently served by insurance providers. Sam set off on a journey to revolutionize Kenya’s health insurance industry with a simple idea: enable individuals to transfer money out of their M-Pesa account (a popular mobile payment system) into a healthcare saving scheme, and then be able to redeem these savings at any healthcare provider using a smart card.
Sam’s first and most important challenge, beyond developing the required technology, was to establish a network of healthcare providers willing to participate in his program. He convinced them to reduce their fees and agree to a price ceiling of KES 450 (US$5), which would include all aspects of a patient’s treatment. Sam’s selling point was that this program would drive larger volumes of people in need of good quality and affordable healthcare to healthcare centers. The economies-of-scale pitch—although obvious—was a hard sale with most healthcare providers. However, with persistence, Sam convinced many private healthcare providers to join his network.
With this network established and growing, Sam’s next challenge was to get people saving and using those savings to access the now affordable healthcare his network of service providers offered. He targeted mobile phone users with M-Pesa accounts and communicated with this group through targeted SMS messages and education campaigns. The introduction of Changamka outpatient smart cards (available at most supermarkets) gave users the sense that they were buying a tangible product. The smart card is synched to the user’s M-Pesa account so that when it is swiped, their contact details and account balance are visible to the service provider and would, therefore, allow the service provider to charge a fixed fee for a consultation and full treatment. What is unique about the Changamka card is that it can be shared among family members and friends, and the funds on it can be contributed by anyone with an M-Pesa account.
The loss of Sam’s sister during childbirth awakened him to the plight of women without access to quality maternal healthcare, so he developed a maternity health-savings program that works similarly to the Changamka outpatient service, but is marketed to pregnant women so that they can save for, and access, quality healthcare throughout their pregnancy. Sam went further to encourage pregnant women to attend maternity check-ups by creating an incentive program that provides transportation-related cash rebates for those women who see their doctor on a regularly scheduled basis.
Sam realizes that the outpatient, inpatient, and maternity health insurance programs all require the user to save and that the very poor are often unable to afford even this nominal amount. To reach this group, Sam is developing an electronic voucher system to allow institutional and individual donors to direct their giving to beneficiaries in need.
Looking ahead, Sam will introduce an inpatient microinsurance cover to take care of more expensive inpatient cases. He realized that his original model would have to be slightly adapted to allow users to save more money, but still at much lower than normal rates. To work, Sam knew he needed more than his 30,000 current users and the backing of an insurer who could leverage large, underutilized deposits. Therefore, he formed a strategic partnership with Safaricom to reach its entire mobile subscriber base of more than fifteen million people; and with the NHIF, which collects the largest volume of insurance funds in the country (20 percent of which is unused). Users will contribute a fixed sum of 10 Kenya shillings each day—deducted directly from their airtime. A year’s worth of remissions translates into less than US$45 but gives users unlimited inpatient coverage made possible by the backing from NHIF. Of all the services Sam has innovated, this has the promise to completely reshape the health insurance space. Involving the largest Kenyan health insurer in a program that tears down walls which have previously limited access to health insurance, will undoubtedly force all other players to move in this direction.
Sam was born and raised early on in Kenya’s western province by his parents, both of whom were teachers. However, his time in rural Western Kenya was cut short when his parents took him to live with his uncle in Nairobi for primary school. Sam recalls the years that followed as greatly influential on his life as his uncle brought Sam up (along with his own children) in a style that Sam describes as militaristic.
His uncle instilled a high level of discipline in Sam and his cousins, expecting nothing but the very best from them academically and personally. In addition to consistently being at the top of his class, Sam remembers being able to cook almost anything and perform every household chore imaginable by the time he was nine. When Sam went to boarding school for secondary school, however, he had time to engage in other passions, the most significant of which was rugby, which he continued to play competitively all through secondary school and university. He attended the University of Nairobi and was a founding member of the Mean Machine Rugby Union Club (1977)—at a time when Rugby was predominantly played by white settlers (muzungus) and expatriates. Because of what it represented, Mean Machine became one of the most popular and successful all-inclusive rugby clubs in Kenya over the years that followed.
When Sam completed his degree in commerce, he began a career in accounting in an audit firm but soon realized that the work environment wasn’t a fit for him. So he left his job and took other senior jobs (still in accounting) at AIG and Africa Reinsurance. About ten years into his career with these organizations, Sam co-founded and manage his own company, Century Advertising, which he did for six years before taking a job as Managing Director of Clarkson Notcutt Insurance Brokers—an opportunity to apply his entrepreneurial skills at a much higher level and with more resources to work with. It was during the six years that he spent at Clarkson Notcutt that his eyes were opened to the disparities that exist in the insurance market. In 2009 Sam resigned and started an insurance program to target the majority of Kenyans in need of insurance but not being served by mainstream insurance companies.