Insurance industry for major reforms in 2019

Dar es Salaam. Major reforms will be undertaken in the insurance industry to increase coverage and stimulate economic growth.

Achieving the targets will involve implementing policy and non-policy reforms, to boost the image of the industry and increase public confidence.

Tanzania Insurance Regulatory Authority (Tira) commissioner general Baghayo Saqware told BusinessWeek that the adoption of the national insurance policy would guide reforms

A draft prepared in 2015 is regarded as a tool to facilitate the attainment of the Tanzania Development Vision 2025 and the Zanzibar Development Vision 2020 which envisage raising the standards of living to the middle-income level.

He said the draft was awaiting the approval of the Ministry of Finance and Planning before being adopted.

According to Dr Saqware, reforms will involve increasing bancassuarance.

That will involve allowing banks to provide insurance services. Currently, insurance business is offered by companies, brokers and agents, with banks operating as insurance agents.

“Due to the lack of regulations, banks only act as agents in insurance business,” he said.

Another plan is to prepare Takaful regulations to govern the insurance business aligned with Islamic laws (Shariah).

He said demand for Islamic insurance products was considerably high.

It is therefore important to initiate measures to satisfy the demand in the insurance market.

Such measures include establishing an appropriate legal and regulatory framework for Islamic insurance practices.

“We want more Muslims to access insurance services and attract more investors to improve the coverage.”

In 2018, the industry performed relatively well as it stabilised after going through a rough 2017.

The market comprises 31 insurers, 25 of them involved in general insurance business, four life insurers, one composite and one reinsurance services.

Due to the transitional impact in complying with the new provisions of the law, premia in the overall insurance market decreased from Sh660 billion in 2016 to Sh637.1 billion in 2017.

But eventually, Dr Saqware said, the players adjusted with the law and in three quarters of 2018, the market performance rose by 7.7 per cent in gross premia compared with a similar period in 2017.

Sh527.96 billion gross premia were written in the period to September 30, 2018, up from Sh490.36 billion in a similar period the previous year. “The market recorded favourable results. That was attributed to increasing public awareness on insurance products, proper marketing programmes and a new system put in place by Tira,” said Dr Saqware. One of the systems which were developed was the Tanzania Imports Insurance Portal, which came into force in January 2018, to capture data on marine imports to comply with the Insurance Act. The aim was to reduce fraud.

Gross premia written for general insurance in the nine months of 2018 rose to Sh449.32 billion, up from Sh431.36 billion in a similar period in 2017. Motor insurance business continues to dominate general insurance products with a market share of 34 per cent. This was followed by health 23 per cent, fire 20 per cent and accidents eight per cent. Other classes shared the remaining 15 per cent of total general insurance business.

Dr Saqware said: “Motor insurance continues to dominate because the public is more aware of this class. Some types of motor insurance are compulsory for every motor vehicle owner.” According to him: “People’s awareness on other products, apart from motor insurance, has also increased. For example, due to increased new lines of business and products in the market, such as fire insurance, the numbers of customers and premia have also grown.”

Life assurance business volume grew from Sh58.99 billion for the period to September 2017 to Sh78.63 billion during a similar period in 2018. During the period there was a slight improvement of 2.7 per cent in individual life, with a significant increase of 44.5 per cent in group life.

“The life business is very promising. When life business improves it indicates that there is an increment in the people’s savings level and it a good sign for the insurance sector and economy as a whole.”

The challenge facing the industry is low public confidence coupled with a deep-seated mistrust of insurance companies.

Dr Saqware said efforts were needed to build the public confidence towards insurance products and make people understand how important those products were to them. “We also have a duty to educate the public and give awareness on how insurance operates and how they can benefit from it.”

Another setback is ensuring that insurance operations are automated. “We strive to automate our processes to keep abreast of technological advancement.” The industry continues to play its strategic role in the national economy by contributing towards mobilisation of financial resources for sustainable economic development. Insurance is defined as a means of protection from financial loss.

An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. A person or entity who buys insurance is known as an insured or as a policyholder.

The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss.

The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.