One-size-fits-all stunting insurance growth

From the 2017 Insurance Institute of Malawi (IIM) Annual Lake Conference last weekend came a gloomy headline: ‘Malawi still underinsured, penetration at 1.4 percent—RBM’.

The story was based on concerns or sentiments expressed by Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe in his keynote address.

In actual figures, the RBM Governor, who is the registrar of insurance/financial services in the country, said only 240 000 people in an estimated population of 17 million are on insurance. This is in sharp contrast to the three percent penetration rate widely quoted by the insurance industry.

In South Africa, the insurance penetration rate stands at 16.9 percent of the population, in Namibia it is at 6.7 percent while in the United Kingdom it is estimated at 10.5 percent.

Motor vehicle insurance is the most popular of the insurance products, accounting for between 60 and 70 percent of the business in Malawi. This can be attributed to the amendment in the Road Traffic Act of 1997 that makes it compulsory for all motor vehicles driving on the country’s roads to have insurance cover.

This year’s IIM conference was held under the theme Business Unusual. I find the theme very challenging and befitting. Going forward, I look forward to seeing an end to business as usual in the sector.

Except for few players both in the long-term (life) and short-term (general) insurance business who have been creative, I see the rest as “copycats” who employ one-size-fits-all tactics. There also seem to be collusion in pricing.In the end, the industry has failed to tap or woo the untapped individuals into the insurance world.

Given that insurance is all about protecting people and businesses assets as well as covering one’s life to ensure beneficiaries are not left in the cold, it surely should be the easiest product to sell.

Sadly, though, the opposite is true. It is a headache to sell insurance products in Malawi. Many times I bump into life insurance sales reps dangling a variety of policies and investment products. However, at the end of the day, few buy the products. The majority who do not buy the products cite “raw deal” as the main reason. They argue that the sum assured will be “peanuts” at maturity; hence, not worth the trouble.

To make the policies attractive, some providers have linked them to inflation to ensure the policies are still lucrative, as it were.

To general insurance companies, my suggestion is for them to go into the untapped market of covering high-value electronic gadgets such as smartphones, HD cameras and television sets that are the in-thing today.

I know some do it, but it is selective with few mobile phone operators and handsets. With all the smartphones, flat screens going at as high as K2 million each and what have you, a creative insurer should work out a product that drags such consumers into the insurance net.

The other area is property insurance. Why have the companies failed to convince property owners to insure their properties, especially residential units? It is the one-size-fit-all tactics to blame where if one wants to insure their house they want them to value clothing, beddings, furniture and what have you.

Insurers should try targeted products that can see one insure their K500 000 -plus TV set only or just the smartphone and any other gadget separately. They should work with dealers to put insurance markups and options in the prices.

Many vendors operating in markets have no insurance. Many of them have cried foul after market fires have destroyed their wares. This is yet another potential area to tap business from. Tell the vendors that with, say K500 per month premium, they would be compensated so much in case of a loss or damage, they would surely jump at the product.

Insurance is a worldwide business. However, it is folly to think that what has worked in South Africa or United States of America can work in Malawi or Uganda. This is where the Business Unusual comes into play.

It may not be an overnight success, but there is potential to grow the industry. n