- By the end of April this year, some 15 banks had started to sell insurance products and services - and they explain both challenges and opportunities along the road
Dar es Salaam. Two years after the regulator introduced ‘bancassurance,’ Tanzanian banks are clambering up the bandwagon which aims at accelerating penetration of the insurance business.
Tanzania introduced bancassurance in March 2019 targeting to increase the uptake of insurance products and services in the country.
Regulations allow banks and other financial institutions to collaborate with insurers in distributing and marketing insurance products and services. By the end of April this year, some 15 banks had started to sell insurance products and services - and they disclose the challenges and opportunities in their endeavours.
“We see a lot of opportunities; but there are some challenges,” said the DCB Commercial Bank director of Investment and Corporate Banking, Zachariah Kapama.
The bank started selling insurance products and services in March this year.
“We receive a commission from the insurance companies - and it is an opportunity to lend to those who do not have money to pay for insurance,” he said.
Talking about challenges, he said the person who sells insurance in a bank must have a Certificate of Insurance (CoI) to operate. Therefore, the bank needs to invest in paying fees to get the certificate.
He also said the insurance products and services in the markets are not well-suited to the local market, hence leading to low demand.
He asked the responsible authorities to increase awareness among the public.
The Tanzania Insurance Regulatory Authority (Tira) and the Bank of Tanzania (BoT) introduced bancassurance as part of its efforts to ensure that more Tanzanians have access to insurance products and services.
Bancassurance agents may act for a minimum of three, and a maximum of 10 insurers, according to the regulations.
The insurance channel was introduced as part of implementing the government’s agenda to raise insurance cover penetration from the current 0.6 percent of Gross Domestic Product (GDP) to at least five percent by 2030.
During a recent meeting organized by Africa College of Insurance and Social Protection (ACISP), a number of stakeholders discussed the challenges and opportunities and the way forward.
The industry experts said the impact of bancassurance will probably be seen if they focus on retail insurance products, especially life insurance which is still low.
Sanlam Life Insurance managing director Julius Magabe said so far they have already partnered with five banks, adding that bancassurance has massive opportunities but at the moment only a small part of it has been worked on.
He cited Kenya, Namibia, Botswana and South Africa as living examples of what he said were doing extraordinarily well in the bancassurance business on the African continent.
“So, what is important is for banks to give it enough impetus and insurance companies to offer attractive products that will bring in more customers,” he said.
“Opportunities (in the bancassurance business) are more than the challenges… Currently, both the banks and insurers are yet to maximize the opportunities which are available in the bancassurance,” he added.
However, head of Bancassurance at the Absa Group Limited, Mr Sandeep Chavda, said they started the business in June last year - and that opportunities have already increased as banks can now interact more with clients, especially by selling life insurance.
“Most brokers have not sold enough life insurance cover policies, so we have had the opportunity to sell the policies, and our customers understand us.
“This will help to increase awareness and insurance and the bank will be getting a commission from insurers,” he said.
He said the ban assurance has come at the right time as it offers an alternative channel for providing the insurance services.
Many insurers and bankers cited little awareness about insurance services in the country as main factor for low uptake.
The insurance products and services uptake was estimated at 15 percent of the Tanzanian adults and the market is dominated by usage of health insurance products followed by the legally obliged motor vehicle insurances, according to FinScope study 2017.
TPB Bank senior manager for bancassurance Mr Francis Kaaya said the public perceives insurance as secondary need rather than primary need due to existing tendency where calamities are funded by family or clan members rather than transferring the risk to insurance companies.
Mr Kaaya said initial investment cost, particularly training specified bank officers to have minimum insurance qualifications, as required by Bancassurance regulations, was a bit challenging.
However, he pointed out some opportunities including existing positive trust between customers and banks which provide a new window of cross-selling insurance products and new market for insurance premium financing.
Tira corporate communications officer Mr Phostine Oyuke said the insurance business landscape in terms of distribution channels has been constantly changing and regulators have no option other than embracing the changes.
“That’s the reason we opened up for licensing banks to distribute insurance business through the bancassurance model.
“In a span of two years, we’ve licensed 15 banks to transact insurance business. Amongst them are the major banks with a sound market niche,” he said.
The registration of such an insurance distribution model has been envisioned to spur insurance penetration to underserved populations.
“We are also planning to do routine evaluation of all insurance distribution models or channels readily in the market in order to inform our decision and policy making procedures,” he added.