Why insurance penetration remains low

Insurance penetration rate in the country remains one of the lowest in the world at 1.4 percent of the population, if figures from the Reserve Bank of Malawi (RBM) are anything to go by.

During the 2017 Insurance Institute of Malawi (IIM) Annual Lake Conference in Mangochi, RBM Governor Dalitso Kabambe challenged insurers to think outside the box to grow business and ensure that as many people as possible access insurance.

By way of numbers, only about 240 000 people out of an estimated population of 17 million have insurance. In South Africa, the insurance penetration rate stands at 16.9 percent of the population whereas in Namibia it is at 6.7 percent and in the United Kingdom 10.5 percent.

In February this year, Vice-President Saulos Chilima, during the IIM Annual Charter Dinner, reiterated the concerns earlier expressed by the Governor. He urged insurers to be innovative to develop products that attract more people and, at the end of the day, increase the penetration rate.

In one recent article, I also asked the insurance industry to be innovative and insure the uninsured. It was my observation that most of the insurance covers relate to motor vehicle insurance because it is mandatory under the Road Traffic Act of 1997 that all motor vehicles should have insurance cover. In fact, motor vehicle insurance accounts for between 60 and 70 percent of the business in Malawi.

What is stunting the growth of insurance? Why are few individuals covered in the country? Do people really know about insurance?

Following my article under the headline ‘Insurance should innovate to grow’, I got feedback from several insurers.

I would like to share the insightful feedback from one chartered insurer who wrote: “Good article. However, I just want to comment that insurance follows the fortune of the economy and our economy hasn’t been performing in the last decade…

“This has put a strain on the insurance market as well as you can’t be innovative in a market where people are not even buying the basic insurance cover.

“Insurance is a game of numbers. For any product to sale it must have estimated numbers for it to be profitable and mostly these numbers are not there. That is the reason our innovative products are just shelved away.

“Individuals as well as corporate are struggling to make ends meet and they find insurance as not being a priority.

“All the products you mentioned in your article are basic covers already available in the market, but no one wants to buy them.”

From this feedback, it is clear that growing insurance business and indeed increasing the penetration rate demands more than innovation. If certain things are done well in the economy, the same will trickle down to the insurance industry.

For now, authorities may brag about “economic turnaround” based on single-digit inflation rate, lower interest rates and a stable kwacha. However, fruits of the same will be more appreciated when they translate into tangible changes for the masses than mere paperwork at Capital Hill.

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.

This is where the Business Unusual concept comes in. Insurers should avoid one-size-fit-all solutions or offerings.


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