Niche products: Catalysts for growth of Tanzania's insurance sector

finance & economy - January 16, 2021

The Commissioner of Insurance Mussa Juma spoke to Emmanuel Onyango about strategies to revive and grow Tanzania's insurance sector.

What are the challenges facing insurance players and stakeholders in Tanzania?
They include the lack of awareness, which is still very low. About 15 percent of citizens do not know about insurance products and their categories, and those who do, don’t use them effectively.

Our market also lacks professionals capable of designing products specific to various groups in society and especially those that suit the needs of those in rural areas, who are mostly farmers. Coverage is therefore low. It is this background that compels insurance companies to embark on training its staff to design more products.

Insurance awareness is still very low as recently confirmed by the ministry. What strategies have you put in place in order to promote the sector and its products?

The National Insurance Regulatory Authority (TIRA) considers making property insurance compulsory. What we have unanimously agreed on with key stakeholders is that, we are going to establish and develop a firm national insurance database in collaboration with the National Bureau of Statistics (NBS).

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We have prepared the National Insurance Education Strategy, which aims to reach the public. There are three key things in the strategy, which are insurance activities, products as well as consumer protections.

By increasing the number of compulsory products in the market more people will have access to insurance, which will contribute to improve their living standards.

Currently, most people think of motor insurance rather than health insurance as an obligatory insurance product. We also target to grow the industry’s contribution to the economy to three percent within two years.

Why is it that only a few insurance companies have branches in rural areas?
This is linked to business orientation, whereby businesses have mostly flourished in towns and cities. Also, the cost needed to open and operate new offices is another contributing factor.

Dairy and livestock farmers need insurance products, but this requires significant investments. Another reason is the low penetration of insurers, agents and brokers.

Many Tanzanian insurers rely on local brokers to boost their businesses, which costs them considerably in the form of commissions. As with insurers across the globe, finding low-cost alternatives to broker-led insurance is a priority for more advanced players in the market.

Instead of using insurance agents and brokers, most insurance companies have embarked on using bancassurance. The banking sector’s network is wider and has reached many rural areas. Most banks in the country have branches in almost all districts and with the use of agency banking many people are currently accessing banking services easily.

How are insurers taking part in mega projects implemented by the government?

Tanzania is currently implementing flagship projects such as the standard gauge railway, hydro-electric power at Stigler Gorge and these must be insured.

Since TIRA acts as a co-ordinator for all insurance matters in the country, we have introduced a system of re-insurance. Through this system, local companies join to offer insurance. Tanzania Re-insurance facilitates this type of arrangement wherever possible. This is one way of boosting local insurance companies and growing their businesses. However, at some point, foreign financed projects often have a clause that binds them to a foreign insurance company. However, the National Insurance Corporation (NIC) has been mandated to take on the responsibility of insuring all government projects in the country.

How do you address agricultural insurance in Tanzania?
Tanzania seeks to become an industrialised economy, and this needs agricultural oriented materials such as cotton, coffee and sisal. The government has therefore put emphasis on covering farm crops.

Currently, the authority has developed demand-driven products in rural reserve settlements. The authority is currently formulating a framework known as the National Agricultural Livestock Insurance Scheme (NALIS), which seeks to support the agricultural sector.

How are farmers responding to agricultural insurance in the country?

This is a new product that needs more awareness campaigns. Due to its importance, the government exempted its Value Added Tax to encourage uptake.

Please outline the successes and achievements of the past five years.
TIRA established the TIRA-Mis to automate the management information system. In April this year, the authority expects to launch a stickerless motor vehicle insurance product for online monitoring by the police. The move aims to eradicate fake insurance certificates in the country.

Tanzania currently has 31 insurance companies, 635 insurance agents, 109 brokers and 55 loss adjusters and assessors.

theeastafrican



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