The consumption of insurance products has improved due to rising cost of living and changes in lifestyle, an expert has said.
Nico Life Insurance company chief executive officer Osman Karim, in an interview last week, noted that Malawians come from a background of extended families, hence support each other when there are problems such as funerals.
However, he pointed out that because life is now becoming hard, and that people can no longer support each other in times of need as they used to do, Malawians are turning to alternatives such as insurance.
“Our culture has changed. About 15 years ago, coffins were manufactured and kept away from the public, but today you find coffins displayed along the streets.
This shows how Malawians have absorbed and accepted death. We have transcended from a position where we could not discuss death to a position where we can pre-arrange finances for death and this has affected life assurance.
“The industry is growing and there is more compliance. Although studies that have been done so far on the insurance penetration indicate low consumption, the studies exclude other products that are a substantial in number,” said Karim.
He, however, noted that compared to other countries, consumption of insurance products is still low.
But Karim argued that this is dependent on the history of insurance, especially in South Africa and Zimbabwe where they show high levels of insurance consumption.
He also noted that Malawi’s low consumption of insurance products can be attributed to the size of the middle class.
The Reserve Bank of Malawi (RBM) June 2013 Financial Stability Report noted that the insurance sector remained sound over the six months to March 2013.
“Assessment of soundness indicators shows an improvement in capital positions, asset quality and liquidity for both the general and life insurance companies. Overall, the insurance industry registered a higher growth over the review period,” reads the report in part.
The report notes that assets of the general insurance companies grew by 3.7 percent over the six months to March 2013 from K13.7 billion to K14.2 billion due to an increase in investment assets, with 40.2 percent increase in government securities.
The report further notes that similarly, life insurance companies registered a higher growth in assets of 20.3 percent from a growth of 13.3 percent between April and September 2012.
RBM attributed the growth to an increase in investment activity as witnessed by 11.3 percent and 26.9 percent rise in securities investments and the stock market respectively.