AFRICA-BUSINESS-Africa's strained social networks open doors for life insurers

* In Africa, communities act like insurance policies

* As social ties fray, life insurance gains customers

* Kenya, Ghana attract insurers, markets still modest

* Paying for funerals still main focus of policies

By Katharine Houreld

NAIROBI, Oct 31 (Reuters) - Families gather at Nairobi's Garden Square restaurant each evening seeking donations from friends and relatives to meet spiralling medical, school and funeral costs.

These "harambees", Swahili for "let's pull together", are for many Kenyans the equivalent of an insurance policy, as just 1 percent of the population have life cover.

But such traditional community ties are fraying amid the urban bustle and some are now wishing they had a secured an insurance payout, rather than relying on the goodwill of others.

"We have been here two weeks trying to raise money," said Ezra Rahedi, 30, slowly sipping on a soda as he added up the costs of old medical bills and a funeral for a relative. "If we had insurance, we could have had (the funeral) already."

Changing attitudes and rising disposable incomes in many parts of Africa, from Kenya in the east to Ghana in the west, are creating new opportunities for life insurance firms.

But outside well-developed economies like South Africa, life insurance firms have to start with the basics, explaining what they do and how they can help in times of need.

"In our African culture, a problem is communal. (But) this culture is dying," said Elijah Wachira, managing director of CIC, one of 51 insurance firms in Kenya, of which 26 offer life cover.

"We go to the bottom of the pyramid and tell them, 'this is a more formal way'," he said.

For companies like Jubilee and Britam, two of the biggest life insurers in Kenya, it means sending sales people to canvass the families gathered around the flimsy white plastic tables in the concrete yard of the Garden Square - the heart of the "harambee" culture.

The restaurant's owner, Patrick Barasa, said he often sees agents explaining to diners sharing a chicken and chips how a policy works.

"You hear of people suffering all the time. The breadwinner disappears, the children suffer. Friends come for a short time, but there's no follow-up," said Barasa, who took out a policy for himself after seeing others struggle.

FUNDING FUNERALS

Much of the life business in Africa is still associated with meeting funeral costs, which in many societies can be lavish, celebrating the life of the deceased with big gatherings.

But Owusu Yaw Osei-Bobie, operations manager at Ghana Union Assurance (GUA) Life Company Ltd, said he wanted to encourage people to see life cover as offering many more benefits.

"We needed to address the myth and convince the people that life insurance is not only about death, so we designed special micro saving schemes and linked them to our life products," he said, adding schemes for those in casual employment had drawn about 1,500 clients.

Some insurance firms have linked up with Saccos, Kenya's network of savings and loan cooperatives, which offer savers steady returns and allow members to borrow in hard times.

CIC teamed up with Maisha Bora Sacco, a small cooperative whose offices are tucked between factories in Nairobi's industrial area, to introduce a mandatory life insurance scheme for all of its 3,500 members.

For a 100 shilling monthly premium, it pays 25,000 shillings for funeral expenses, helping meet a major part of what can sometimes take many days or weeks to raise via "harambees".

"Many people opposed this scheme when it was first introduced, but now they are asking for the premiums to be increased so they can receive more when it is their turn," said Simon Arunga, a board member of Maisha Bora Sacco.

When his mother died in October, the payout helped meet a chunk of those funeral costs.

"When you are assured of something, immediately it eases your mind," he said.

INTERNATIONAL INTEREST

Life insurance has grown in Kenya, but just 1 percent of the nation's 46 million people are covered. Premiums doubled to 62 billion shillings in 2015 from 31 billion shillings in 2011, Association of Kenya Insurers figures show.

Its potential has drawn international firms like Britain's Prudential, which entered in 2014, but regional players like Nairobi-based Britam, with a 30 percent share of Kenya's life market, still dominate.

The Kenyan industry recorded a profit of 11.57 billion shillings before tax in 2015, compared to 15.74 billion shillings in 2014.

In Ghana, Osei-Bobie said the life insurance market had grown from the 1.5 percent of the population to 2 percent in three years but was "still relatively small", adding GUA Life aimed to educate more people on the benefits.

Tom Gichuhi, Association of Kenya Insurers chief, said Kenya, like other African nations, had a young population and many were not paid enough to afford insurance.

But the biggest problem is that many who could afford a policy have no knowledge about life insurance, he added.

"People will not buy what they don't know about," he said. ($1 = 101.3500 Kenyan shillings) (Additional reporting by Kwasi Kpodo in Accra and Carolyn Cohn in London; Editing by Edmund Blair and Alexander Smith)