Tanzania’s insurance industry has continued to play a strategic role in the national economy by providing underwriting capacity and contributing toward mobilizing financial resources for sustainable economic development in the country.
According to Tanzania Insurance Regulatory Authority (TIRA’s) 2013 Annual Insurance Market Performance Report, the insurance industry grew at an annual average rate of 19.9 percent in Gross Premium Written (GPW) to TSh 476 billion (approx. $330 million USD @ $1=1450 TSh) in 2013 from TZS 231 billion (approx. $192 million USD @ $1=1200TSh) in 2009. Meanwhile, the national GDP and the finance intermediation sector GDP in nominal terms have grown at annual average rates of 16.3 percent and 18.6 percent, respectively, between 2009 and 2013.
The insurance industry has therefore demonstrated a higher average growth rate than the national and the finance intermediation sectors of the GDP over the five year period (2009-2013).
Regardless of its sustained growth in the last seven years, studies have shown that there is still a low insurance and micro-insurance uptake in Tanzania compared to developed countries. There is a need for taking effective measures to further improve the insurance sector in Tanzania so that it can be affordable and useable to all Tanzanians, according to an Insurance Study in Tanzania conducted by the Financial Sector Deepening Trust (FSDT).
The FSDT was incorporated in Tanzania on 1 July, 2004 with the aim to develop a deeper financial system to provide greater access to financial services for Tanzanians.
The FSDT’s mission seeks to improve the livelihoods of poor households via the creation of sustainable improvements in the financial services sector. The hope is to empower Tanzanians so they can access credit and insurance that can contribute to their personal lives and overall, to national economic growth.
According to FSDT, approximately 12.7 million adults lack insurance leaving 3.7 million adults insured but having unattended needs. The remaining 7.4 million citizens, equating to about 30 percent of the adult population are deemed unable to afford insurance.
According to a FinScope Tanzania 2013 survey 64.2 percent of the population has never heard about insurance while 5.6 percent of the population does not know how or where to access insurance with 4.8 percent of the population not knowing how insurance works.
Such statistics indicate a ready market for insurance providers in Tanzania; however, some market and regulatory imperatives must be implemented to ensure a rapid growth of the insurance sector in the country, as well as ensuring that all Tanzanians understand the concept and importance of insurance in their daily lives.
The FinScope survey measures the demand for, and access and barriers to, the full range of financial services offered in a particular country. It is a consumer-based, nationally representative survey which is conducted in several countries throughout Africa and Asia. FinScope provides insights into the financial aspects of consumer living and helps understand consumer demand across the four Landscape of Access categories: transactions, savings, credit and insurance.
Some of these imperatives include: creating and compelling business for insurance, building skills and capacity to trigger insurance, product innovation, ensuring positive market discovery, educating customers through sales processes, and considering regulatory treatment of community-based health insurance schemes, thus making the insurance distribution system as flexible as possible and developing a risk-based insurance framework that defines insurance as low risk so as to apply a simplified customer due diligence to it.
Recognizing its importance, FSDT partnered up with the Tanzania Insurance Regulatory Authority (TIRA), Center of Financial Regulation and Inclusion (CENFRI), FinMark Trust (FMT) and Access to Insurance Initiative, to take part in assisting with further development of the insurance sector in Tanzania through different diagnostic studies. These studies are done to analyze the insurance sector in Tanzania, to understand its key drivers and constraints, and hence design ways to see growth in the insurance and non-banking sector. The studies can be found on the FSDT website at www.fsdt.or.tz.
Chrisant Donald, a local Tanzanian agent for various insurance companies in the country said there are many products and services which extend the number of options available so that clients may choose the type of insurance coverage that best suits their requirements.
“As a result of the application of standard procedures in granting licenses to pursue insurance businesses and in performing financial and solvency supervision of insurance companies, there has been steady interest by foreign insurance companies to obtain a license to pursue insurance business in the country,”he stressed.
“I urge the big insurance companies to collaborate with the country’s Insurance Board to offer a variety of insurance products in order to promote the industry.
Employees of the current supervisory bodies have the opportunity to obtain the latest developments in the insurance market, and hence are better able to exchange relevant information with representatives of supervisory authorities. By improving and communicating to local Tanzanians on the developments in the insurance sector, many locals may engage in undertaking insurance policies that meet their respective needs.
Based on findings by the FSDT the growth in Tanzania’s economy should demonstrate the need for insurers to find new innovative products for the local market. Yet few insurers have made this mind shift yet. They still have a largely “high value low volume” focus. The reasons for not prioritizing retail/mass market opportunities include distribution and premium collection challenges.
To tap into Tanzania’s growing market, insurance companies need scalability in order to be sustainable, thus ensuring they are able to provide to more people via the establishment of efficient administration systems meeting the needs of current and new clients.
To ensure growth of the insurance industry, there is a need to overcome technical and sales skills deficiencies and, particularly, address solvency concerns to ensure that when a company fails it does not tarnish the image of the entire industry. Unless these factors are addressed, there is a risk that the micro-insurance market growth may stall and even if there is consumer fall-out, these matters must be addressed, as this positive outlook will help facilitate a next wave of growth towards an inclusive insurance market in Tanzania.
Written by Theresia Victor