Insurance should innovate to grow

Not long ago, Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe, in his capacity as registrar of financial services, challenged players in the insurance industry to think outside the box to grow business and ensure that more people access their services.

That was during the 2017 Insurance Institute of Malawi (IIM) Annual Lake Conference in Mangochi from where gloomy headlines such as ‘Malawi still underinsured, penetration at 1.4 percent-RBM’ were highlighted.

In his keynote address, the RBM Governor said only 240 000 people out of an estimated population of 17 million have 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 whereas in Namibia it is at 6.7 percent and in the United Kingdom 10.5 percent.

Fast-forward to February 2018, Vice-President Saulos Chilima expressed similar concerns about innovation and challenged insurers to be innovative to develop products that attract more people and, at the end of the day, increase the penetration rate.

Put loosely, 98 out of every 100 Malawians are excluded from insurance or not covered.

In fact, motor vehicle insurance is the most popular of the insurance products as it accounts for between 60 and 70 percent of the business in Malawi. This is largely attributed to the amendment in the Road Traffic Act of 1997 that made it compulsory for all motor vehicles driving on the country’s roads to have insurance cover.

Both the lake conference addressed by the RBM Governor and the Insurance Charter Dinner in Blantyre where the Vice-President spoke were held under the theme Business Unusual, a very creative, challenging and befitting theme.

It is time players in the insurance industry stopped doing business as usual.

The other day I argued that except a 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-fit-all tactics. In the end, the industry has failed to attract the untapped individuals into the insurance world.

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. On paper, insurance should be the easiest product to sell; but, the reality is that it is one of the hardest to convince one to buy.

Many times I meet life insurance sales agents offering a variety of policies and investment products. But, 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’ or of less value at maturity; hence, not worth the trouble.

To their credit, some service providers have made life insurance policies attractive by linking them to inflation to ensure the policies remain lucrative.

In the case of general insurance companies, my suggestion is for them to go into the untapped market of covering high-value electronic gadgets, including smartphones, HD cameras, television sets and even motor vehicle entertainment systems that are the in-thing today.

Property insurance is another potential area to grow insurance penetration. Why is it that people would insure their vehicles but choose not to cover their houses which in many cases are of more value than the vehicles they drive? Why have insurers failed to convince property owners to insure their properties, especially residential units?

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.

In recent years, market fires have been on the rise.

In such situations, many vendors who lose their wares are left helpless. They have no insurance cover. 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.

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