Why is Africa under-insured and what are the implications?

By Anna Tibaijuka

In last week’s first part of this series I touched on the debate about insurance in Islam and clarified that many scholars do not consider insurance to be gambling, but rather a system of protection. Some Muslim countries have adopted a dual system where conventional insurance is supplemented by Islamic insurance known as Takaful. Tanzania is also developing Takaful services for those who prefer them.

In this Part II, I turn to a very practical and fundamental issue: why insurance use (penetration) remains very low in Tanzania and across East Africa, and why this matters for ordinary citizens.

I write from practical experience, having spent over 30 years in the sector, including more than 20 years as a director of one of the few locally owned insurance companies operating across the country.

What do we mean by insurance penetration? It simply means how much insurance is used in an economy, measured as a share of national income (GDP). In simple terms, it tells us whether people are protected or not.

In developed countries, about 6 percent to 10 percent of the economy is insured. In Africa, the figure is about 2 percent to 3 percent. In East Africa, it is about 1 percent to 2 percent. In Tanzania, it is less than 1 percent. This means that most Tanzanians are not insured.

Even where the insurance sector is growing, the use of insurance remains low. According to TIRA’s 2024 market report, premiums reached about Sh1.52 trillion and assets about Sh2.47 trillion. However, FinScope Tanzania 2023 shows that insurance usage declined from 15 percent in 2017 to 10 percent in 2023, even though most people agree that insurance is important. This gap between awareness and actual use is the real challenge.

Low insurance penetration has serious consequences. Families fall into poverty after illness or accidents. Businesses collapse after fire or loss. Government carries a heavier burden during crises. Citizens depend on relatives instead of formal systems. In short, we are living with high risks but very little protection.

Many people think Tanzania lacks insurance laws, but this is not correct. The country has the Insurance Act, which regulates the sector and establishes TIRA to ensure a fair and stable market. There are also consumer protection mechanisms, including complaints systems, an Ombudsman, and an Insurance Appeals Tribunal. Insurers are required to settle claims within 45 days, and failure to do so may be treated as bad faith.

The Motor Vehicles Insurance Act makes third-party insurance compulsory, and recent laws have expanded mandatory insurance to cover commercial buildings, markets, and other activities. Tanzania is also implementing universal health insurance under the Health Insurance Act of 2023.

So the problem is not lack of laws. The problem is low understanding and weak enforcement.

Most insurance in Tanzania comes from motor vehicle insurance because it is compulsory. Without this requirement, insurance uptake would be extremely low. Even then, many vehicles are not insured, or are insured only at the time of purchase and not renewed. Motorcycles, despite high accident rates, are often uninsured.

Although the law requires insurance, enforcement is inconsistent. Compliance remains low, and this undermines the entire system. If enforcement were stronger, accident victims would be better protected, costs would not fall on families, and road behaviour would improve.

Another major challenge is low public understanding. Many people do not understand what insurance covers, how claims are paid, or the difference between legal liability and insurance cover. For example, a court may award compensation based on damages, but an insurance policy pays only up to its limit. The balance may remain the responsibility of the vehicle owner. This misunderstanding creates unrealistic expectations, mistrust, and prolonged court disputes.

Traditionally, Tanzanians rely on family and community support in times of crisis. These systems remain important, but they are no longer sufficient on their own. Medical costs are high, accidents are frequent, and urban life is more complex. Informal systems alone cannot provide adequate protection.

Many people also believe insurance is expensive or unnecessary. But the issue is not only cost. It is also lack of awareness, lack of trust, and irregular income patterns. Premiums are often paid annually, which does not match how many households earn and spend money.

The implications are serious. When insurance penetration is low, risks are carried by individuals instead of being shared. Households fall into poverty aftershocks. Businesses avoid investment. Economic growth slows down. Local insurance companies remain small, while foreign companies dominate and repatriate profits.

The way forward is clear. Tanzania needs stronger enforcement of existing laws, mass public education—including for courts and legal professionals—promotion of simple products such as health and personal accident insurance, and expansion of compulsory insurance where necessary. Trust must be built through fair claims settlement, and digital platforms should be used to make insurance more accessible.

Tanzania does not suffer from too much insurance. It suffers from too little insurance. We have the laws, the regulator, and the institutions. What is missing is understanding, enforcement, and participation.

Insurance is not a luxury. It is a basic tool of protection in a modern economy.

Next week’s third part will explain why insurance funds are not unlimited and why discipline in claims is essential for the system to survive.

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