How Tanzania can build a strong and inclusive insurance industry

By Anna Tibaijuka

In the first part of this series I discussed the debate on insurance and Islam. In the second part I explained why Tanzania remains underinsured. In last week’s third instalment I clarified that insurance funds are not unlimited and must be used responsibly.

In this final part, I turn to a broader question: What kind of insurance industry does Tanzania want to build for the future?

This is not just a technical issue; it is a matter of economic development, financial inclusion, and national resilience.

Tanzania’s Vision 2050 recognises the importance of a modern and inclusive financial system. It acknowledges that insurance plays a role in protecting citizens against risk, supporting investment, and strengthening economic stability. It also highlights the need for financial inclusion, stronger institutions, and better use of technology.

However, the Vision does not provide a detailed roadmap for how the insurance industry itself should develop. It recognises insurance, but does not fully strategise its transformation. This leaves an important policy space that must now be addressed.

Insurance development is not only about laws and awareness. It is also about how the market is structured.

One important development in Tanzania has been the growth of bancassurance—where banks distribute insurance products. In principle, this is positive. Banks have wide customer networks, strong distribution channels, and trusted relationships with clients. This can help increase insurance penetration.

However, in practice, concerns have emerged.

In many cases, banks work with a limited number of insurance companies under fixed arrangements. Customers seeking loans may be required, or strongly encouraged, to obtain insurance from these designated providers.

This creates several challenges. It reduces consumer choice, disadvantages smaller insurers, and contributes to market concentration among a few large players. A customer who has been insured for many years by one company may be forced to switch simply to access a loan.

This is not just a business issue. It is a public policy issue about fairness, competition, and inclusion.

Another important but less visible issue is the cost of compliance. Tanzania has adopted international standards such as IFRS 17, which changes how insurance liabilities are calculated and reported. This improves transparency but also requires new systems, expertise, and significant investment.

At the same time, insurers must invest in modern software systems, which are often expensive and imported. These systems are necessary but raise the cost of doing business, especially for smaller and locally owned companies.

The cost structure is further affected by regulatory levies, commissions, operational costs, and taxation. While not all insurance products attract VAT, the overall burden remains significant and affects affordability.

These pressures have implications for market structure. Local insurance companies remain small and struggle to compete, while larger or foreign-linked companies expand. In some cases, profits are repatriated, limiting domestic capital accumulation.

If current trends continue, Tanzania risks developing an insurance industry that is compliant but expensive, growing but concentrated, and modern but not inclusive.

This is not the goal of development policy.

To build a strong and inclusive insurance industry, Tanzania should focus on expanding insurance penetration, strengthening public education, ensuring fair competition, supporting local industry growth, managing cost pressures, and aligning insurance with national development priorities such as health, agriculture, and infrastructure.

Insurance is not just a financial product; it is a foundation of a modern, resilient, and inclusive economy.

Tanzania has made important progress. The laws exist, institutions are in place, and awareness is growing. But deeper structural issues remain.

The task now is not only to grow the industry, but to shape it deliberately—so that it is fair, inclusive, competitive, and beneficial to the nation.

If this is done well, insurance can become a powerful tool for development. If not, it risks becoming a system that serves only a few.

The choice is ours.

Prof Anna Kajumulo Tibaijuka is a retired Tanzanian Minister and former United Nations Under-Secretary-General and Executive Director of UN-HABITAT in Nairobi