What must be done for insurance sector to contribute more to Tanzania's economy

The contribution of insurance to the economy is still below one percent of the gross domestic product (GDP), this is despite various plans the government is executing with the view twards improving industry’s performance. The Citizen’s Gadiosa Lamtey held and interview with Dr Elirehema Doriye, the director general of the National Insurance Corporation (NIC), which has turned from being a loss-making entity to the most profitable insurer that accounted for about 70 percent of total revenue of Tanzania’s top 10 insurance companies last year, after generating Sh49 billion. Read on:

QUESTION: From your experience in the insurance industry, what can be done to boost industry’s contribution to the national economy?

ANSWER: There are many areas that need to be worked on. One of them is fraud which is committed by individuals inside the companies; various insurance stakeholders as well as their own clients. There is a large area to work on and the challenge is big because we currently don’t have a database of claims and clients that become difficult to deal with. If we had that database, it would be easy to monitor and thus come up with a way of dealing with those fraudsters as they press for claims every year.

We also need to invest in the digital space. The digital transformation helps in reducing some of the costs and increases efficiency but also to build more confidence in customers.

We are still in the old system of sending assessors to check. This delays the process and increases costs. We also need to work on product selection. We still do not know the products that people need. This is because we don’t have the right database. Get feedback from customers so you know how to improve and manage. All you need is a digital system to conduct data analytics.

What is the role of bancassurance in implementing the Financial Sector Master Plan that intends to increase insurance penetration by 50 percent come 2030?

It is a good distribution channel and it is doing well in the market right now. However, it needs to be well guided in the sense that people need to understand what we actually mean when we talk about penetration. If bancassurance can work on retail, it will do well in increasing insurance uptake. At the moment, it’s too wide. The focus on the retail side is lower than the corporate side.

If more emphasis is put on the retail sie, it will increase penetration especially in life insurance. We need regulations to openly say what we want to achieve and how to achieve it. In short, it is a good distribution channel but it needs to be guided.

How did you deal with loss-making situation at NIC?

When I joined NIC in 2019, the first thing we did was to invest heavily in digital systems, which, among other things, have helped to reduce loopholes of loss of funds within our operations.

It has helped us to reduce cases of fraud and increase efficiency. It has also changed the culture and mindsets of our people.

Members of staff now think business which is contrary to the situation that I found when I joined as people then regarded it as a government entity rather than one that must do business.

What was it like to bring such a change to NIC?

It was not easy because we had to work on a number of outdated systems, including business model, IT systems and even staff.

There were many areas that were creating many loopholes for operation inefficiency and thus resulting in fraud. At the time of my joining, digital use in the company was only at 10 percent. Most of the tasks were being conducted manually. This created room for unsubstantiated claims, resulting into losses. As we are talking, things have changed and now, the use of digital system is almost at 85 percent.

We also changed the strategic plan because we inherited the one that could not talk about profits. That is how we managed to raise our efficiency because we started thinking about customers and their needs.

We have done a lot but we still need to do much more in the coming three years.

Apart from what you have mentioned, what else did you do to turn NIC into the most profitable insurance outfit in Tanzania?

We also changed the way we invest whereby we decided to reduce our investments in real estate. We did so after realising that investment in real estate requires a close management which resulted into losses. We made a deliberate decision of injecting a chunk of money in bonds. When I joined this organisation, we had zero investment in bonds but so far we have invested Sh120 billion.

We have invested in Fixed Deposit Receipt (FDRs) which is yet another area that we did not do much previously.

I joined this organisation at a time when investments in real estate and in FDRs was only at Sh2 billion but now, by the end of this financial year, we will have injected Sh24 billion into the two avenues.

The outcome of this investment is an upward trend in performance, with profit before tax growing to Sh73.10 billion last year from Sh3.6 billion that was recorded in 2018. Our net assets jumped to Sh116.54 billion last year from Sh39.47 billion. This was all because we had minimised costs, digitised systems and made the right choice on investment avenues.

What is your message to the government which is NIC’s shareholder?

I am very pleased that during the past three years we have managed to significantly increase value to our shareholder, the government. During the period, the average share price grew from Sh210 in 2018 to Sh858 in 2021 (using conservative valuation approach) which put the shareholder in great position for any future strategic decision.

This has been achieved through successful execution of people and business transformation strategy underpinned by delivering on a strong cost-efficiency drive through digital transformation.