‘Insurance firms should be more innovative’

Allianz Global Corporate & Specialty (AGCS) Africa CEO Delphine Maïdou urged all stakeholders at the Insurance Institute of Zimbabwe (IIZ) Conference at Victoria Falls to find innovative and creative solutions to revive the insurance sector in the country as the economy continues to underperform.

“The economic meltdown has severely dented the insurance sector. Zimbabwe’s insurance penetration ratio declined from around 6% to below 2% over the past decade. The industry remains under significant pressure, with many companies seen to be financially unsound. The capital requirement for insurance companies is US$1,5 million. The regulator is currently looking at increasing it to US$2,5 million and this could put more companies under strain. With a penetration rate of more than 14%, South Africa needs insurance companies to have US$1 million to operate,” said Maïdou during the ongoing Insurance Institute of Zimbabwe conference in Victoria Falls.

“The lack of capitalisation could restrict companies from taking a bigger share of risks, so they can keep more premiums in the country. Some insurers may resort to undercutting premium, which results in them failing to meet their claims obligations. In the end this could result in a loss of confidence in the local market. Some clients may place their business with regional and international insurers ,” she adds.

The total premiums placed offshore across both life and non-life insurance in Africa is estimated at US$4,29 billion.

“Regulators in most African countries have indicated their awareness of the risk of unnecessary transfer of premiums offshore and have adopted premium retention frameworks that aim to ensure that only necessary offshore premium transfer occurs,” she said.

Maidou explained that there is a strong correlation between economic progress and insurance penetration. A lot of the challenges facing the sector in Zimbabwe can be attributed to the struggling economy.

“With a depressed economy, risk management and enterprise risk management tend to weaken. So, it is important to revitalize these essentials to support the sustainability of insurance sector. The advancement of mining, energy and agriculture are critical to the country’s economy. At the same time, the insurance industry needs to provide robust and sustained solutions for both traditional and alternative risk transfer solutions to protect the expansion,” she says.

But there are other factors limiting the growth of the industry. These include: low level of trust, low income levels; little awareness of insurance; legal and judicial systems as well as lack of human capital and expertise.

“The consumer trust level on the insurance sector needs to be enhanced for it to grow. Trust within the business space where AGCS Africa operates is slightly better as businesses understand the value of insurance a lot more than individual consumers. I encourage the industry to be more open and transparent with clients and more importantly to pay legitimate claims,” says Maïdou, who is originally from Burkina Faso.

“The provision of micro insurance solutions needs to be broadened through trusted stakeholder models to insure more individuals and businesses are insured. For this to work, the sector needs to use alternative distribution channels such as mobile technology, retailers and banks.” –Staff Writer

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