The insurance game
This is an old trick in the world of negotiation with origins in the so-called game theory. Do not try it at home; you may sleep on the couch. We are always playing games of some kind. Grab a tip but it would not help you always because others are better players. In any transaction that requires negotiation of some type, often the one who mentions the price first loses. This of course assumes that you are a better player than the counterpart. It is not always the case unless you know the exact strategies of the other player.
We live in a world of imperfection information and everyone is trying to control it, hide and manage it ruthlessly for their own benefit. It is in our nature as human beings. It is being rational. Maximise gain and minimise pain at all cost. If you have information at first, you win for sure. Get me right on this one as my example is absurd and annoying. Think of the “access to truth” bill that scribes and all those that care about public information have been pushing among the wise ones. Who wins?
Like all young professionals, after reading some subjects I was so devastated that I never made to the shortlist of a job that could have seen me chasing premiums on the high street. I could be playing that game, digging deep into the lifestyles of those that dared to buy insurance of some kind. My focus could have been trying to pick those spots hidden that would ensure that they pay a high premium, make money. After all, this is how capitalism works. But, then, I still run an insurance company in my dreams. Something that I have been working on over the last four years has been to push for a bill to access all information about individuals. Heaps of it, to say the least. For example, how many alcoholic drinks each person in the country takes, how many times they visit the doctor. Whether they drive or do some dangerous sport. The list is endless and I am trying to get as much as I can so that I can make a killing and mint billions of some kind. That is how the insurance game works. Get more about the other party and then charge them a higher premium. If the market is quite small and shallow where all service providers are a clique of friends, shopping around is almost impossible.
I am a novice when it comes to the insurance market in this country. But like those that have a better understanding of the industry, the penetration rate is quite low with some conservative estimates at less than three percent. The average Malawian does not have an insurance of some kind unless they own a car as a result of a statutory requirement. There are many theories and they include the fact that people do not have enough money to pay premiums.
But if you look at the insurance industry, the ground is very clear. Some clever minds or corporations invested in the business and, in my opinion, have got their strategy all wrong or precisely, it is now outdated. They love to decry the notion of low penetration yet the average middle class person, a potential, has scanty information about what products they offer. Similarly, the image that insurance companies exist to collect premiums and do not want to pay claims is well entrenched in the mind of any potential policyholder. Much as fraud exists, part of the entire game involving asymmetric information, the cost of making claims is quite high and somehow claimants just resign to their fate. After all most of them are “God fearing” and reckon that the fate that befell them has some divine origins. Let it be and it goes and of course one player wins. It is like parking a bus in the game of soccer.
This makes it a real problem for the Malawi insurance industry. Insurance taking is restricted to small elite that can ruthlessly meet the costs of making a claim. The majority that can potentially access some products if the industry was innovative and carefully managed its reputation are excluded. So next time, we should be spared tantrums about low insurance penetration rates. Otherwise, it seems the industry is keen to hang on to the few that trade with it.
Who is supposed to penetrate who in the Malawi insurance business? The insurer?
