Zambia plans to increase microinsurance outreach to six million policies by 2019.
Microinsurance Learning Sessions Zambia concluded on 12 March 2015 in Livingstone
“Most Zambians do not view insurance as a need,” observed Shipango Mutet, President of the Insurance Association of Zambia, at the opening of the 2015 Microinsurance Learning Sessions Zambia event. But the potential in the country and region is huge. The number of microinsurance policies grew from 200,000 in 2011 to over three million in 2015. Within the next four years, the Zambian insurance industry plans to double this figure.
Zambia as a role model
Five years ago, the Zambian Technical Advisory Group (TAG) was founded following a comprehensive microinsurance regulatory study. With the goal of developing a vibrant microinsurance sector serving millions of Zambians, the TAG has undertaken numerous activities facilitated by a country coordinator. Soon the country plans to launch special microinsurance legislation to provide the framework for future growth. The current draft of the regulations limits the sum insured for microinsurance products to four times the national average income and the duration of the policies to 12 months. At the same time, capital requirements are lifted and insurance companies are allowed to sell life as well as non-life insurance.
The impressive increase in the number of policies, mainly a result of new products being distributed via Mobile Network Operators, clearly shows that such a well-structured approach involving all stakeholders can be successful. Cooperation among all stakeholders, a clear common goal and strategy as well as a dedicated coordinator such as Lemmy Manje, who facilitates the process, are key success factors. With this experience, Zambia can act as a role model for other countries. “At the same time, we have to be patient,” warned Dirk Reinhard, Vice Chairman of Munich Re Foundation in his opening address. “It took the developed markets over 100 years to grow to their present size. If we expect the same thing to happen in underdeveloped markets within only five or ten years, we will be disappointed. To reach the goal of six million policies, Muteto therefore called for “long-term strategies as well as improved consumer awareness campaigns.” Permanent Secretary of the Ministry of Finance, Felix Nkulukusa, stated that the government will support any initiatives that can help Zambians manage their risks better.
Microinsurance can be profitable but education is the key
The importance of client education was illustrated by an example from South African Hollard Insurance. The company had made substantial investments in consumer education around a funeral insurance policy. As a result, the take-up rate increased by 7%, or around 250,000 policies, adding an additional USD 2.3 million premium to the business. The necessary investment, however, was only about 35 % of the additional premium.
Several companies and organisations presented their ongoing activities aimed at the development of the insurance market for emerging consumers. “Distribution remains a key challenge,” said R. Krishnaswamy, Managing Director and CEO of Zambian Professional Life Assurance. “At the same time, new technology can boost the market,” he added. But can microinsurance be profitable? Yes, agreed the vast majority of insurance companies such as Hollard, Professional Life and African Life, a subsidiary of Sanlam, who presented during the conference. It not only can be profitable. The market for emerging consumers provides promising opportunities for growth beyond the current business volume.
Opportunities and challenges ahead
As in many other African countries, "life insurance dominates the market in Zambia. But availability and uptake of non-life products is low,” explained Titus Kalenga, TAG chairman. Conference participants cited inaccessible reliable data, poor infrastructure,a lack of knowledge and insufficient governmental support as the main reasons for this – not only in Zambia, but in all participating countries. The hosting country's government and industry have taken the first steps to change this, and many other countries are willing to follow. Regulatory authorities from Kenya, Lesotho, South Africa, Tanzania and Zambia had sent representatives. The insurance regulator of Kenya, Sammy Makove, has invited the ILO and Munich Re Foundation to host a similar “Learning Session” event 2016 in his country. With Kenya as the largest market for microinsurance in East Africa, the co-organisers of the Learning Sessions will certainly not miss such an opportunity to help the poor manage their risks better.
About the event
The Microinsurance Learning Sessions Zambia took place in Livingstone from 10 to 13 March 2015. Nearly 100 insurance experts – mainly from Africa – attended the event under the key topic of “Microinsurance business models for Africa”.
The event was hosted by the Zambian Technical Advisory Group (TAG) in collaboration with the Financial Sector Deepening Zambia (FSDZ), Munich Re Foundation and the ILO’s Impact Insurance Facility. The event has also been supported by FinMark Trust, the Center for Financial Regulation and Inclusion (Cenfri), the Insurers Association of Zambia (IAZ), the Pensions and Insurance Authority (PIA), the Microinsurance Network and the African Insurance Organisation (AIO).
DR - 25.3.2015