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‘Undercutting premiums a threat to insurance sector’

The Insurance Institute of Zimbabwe will in November host an annual conference in Victoria Falls. Businessdigest reporter Fidelity Mhlanga (FM) caught up with conference guest speaker Delphine Maidou (DM), the CE of Allianz Global Corporate & Specialty (AGCS) Africa, to discuss various issues pertaining to the insurance industry ahead of the conference.

FM: What is your impression about the insurance sector in Zimbabwe?

DM: This is my first time to an insurance gathering in Zimbabwe so it would be presumptuous of me to give an assessment of the market. However, as Allianz we do business with highly skilled brokers, reinsurance brokers, insurers and reinsurers in the country and so far it has been fruitful. So we have found it to be a vibrant market and continue to provide capacity for telecommunications, power companies as well as infrastructure projects.

What is interesting about this market is that the concentration of market share is among a few insurers. For instance, up to 80% of the market share sits with the top three life companies while 50% is with the same non-life companies.

Another fascinating fact is that the capital requirements for insurance companies are at US$1,5 million and they are currently looking at increasing it to US$2,5 million. This is much more than in South Africa which sits at R10 million (less than US$1 million for life and R5 million for non-life)

FM: In your view, what can Zimbabwean insurance firms learn from their South African counterparts?

DM: South Africa has one of the highest insurance penetration rates in the world. The country has worked hard to increase insurance penetration through innovation, legislation and the sound financial system. This also has a lot to do with the growing middle-class but also the fact that basic insurance such as motor is compulsory and insurance has been easily accessible compared to other parts of the continent. Some companies have introduced, for example, cash-back initiatives for claims-free years or pay-as-you-drive type insurance.

FM: What are the major challenges affecting the insurance sector in Africa?

DM: A major challenge is the lack of capitalisation within insurance companies. This restricts them from taking bigger share of risks, so they can keep more premiums on the continent. Political instability and inadequate legal systems in certain African countries remain a challenge. I will be discussing some of these challenges during my presentation.

FM: What can Africa do to overcome such challenges?

DM: It’s important for African companies to find ways to partner better with either international firms or other firms within Africa for investment purposes but more importantly for best practices sharing.

The African insurance industry is still young compared to other parts of the world and one way to build up capital is through investment but also through human capital development

FM: Should insurance regulators ban firms from undercutting premiums?

DM: The regulators’ main objective is to make sure that the companies are treating customers fairly and that they are solvent to pay claims. It is the responsibility of insurance companies to ensure that this is also the case. Part of that involves charging the adequate premium for the risk that they are taking on. The regulators should not have to police this if everyone plays their role.

FM: Is undercutting premium a threat to the integrity of the insurance industry?

DM: Not only is this a threat to the integrity of underwriters, it is a bigger threat to the insurance company’s solvency and its ability to pay claims in the future. Capitalisation is a challenge as it is, but undercutting premium just to win business doesn’t help the cause for the industry.

FM: What can delegates expect from you during the IIZ annual conference?

DM: We will discuss what’s happening with the economies of our continent, but also our industry fits into it and what should be our role as the industry.

My primary purpose in going into a market is to get to know it, its challenges and opportunities and how I can carry this knowledge to benefit other markets. I hope that I can bring a perspective that will challenge delegates but also give them something to think about as they go back to their work environment.

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