In the face of stagnating insurance penetration, Ministry of Finance and Economic Affairs says it is working towards boosting the uptake of insurance services through various interventions.
Treasury data shows that in 2017, insurance penetration, which is the contribution of the insurance sector through the amount of premium income generated in a particular year to its economy, was at 1.52 percent while the projected figure for 2021 was 1.50 percent.
These percentages are lower than insurance penetration of three and two percent reported in 2008 and 2014, respectively.
Regardless, Treasury envisions an increase in the total insurance premium as a percentage of gross domestic product (GDP) to 3.5 percent an increase of the percentage of adults having access to insurance products and services to seven percent by 2028 outlined in the 2024/25 Financial Sector Development Strategy (FSDS) III (2024/28).
In an interview on Tuesday on the ambitious targets, chartered insurer Eric Chapola observed that stagnation of growth has been there due to premium growth being below inflation.
He said increasing penetration will demand decisive and deliberate initiatives from the insurance industry as well as government.
Chapola, who is former Nico Life Insurance Company chief executive officer, said: “In essence, 2028 is not far. Right now, I don’t see any such initiatives being implemented as we get closer to 2028.
“What is the basis of this 3.5 percent by 2028? Rhetoric alone will not make us achieve that target. What did we do when we noticed the stagnation of the penetration over the years as reported? Who are the champions driving this target?”
He said insurance has, among others, stagnated because of increasing insurance cost that has made the public not to buy insurances, lack of no deliberate civic education about insurance and lack of insurance syllabuses in secondary schools,
Chapola, however, hoped that the Insurance Act 2024 will help increase the penetration as it now makes insurance of public buildings compulsory among other demands.
Insurance Association of Malawi data shows that the industry posted a K2 billion combined underwriting loss in 2023, a rise from the previous year’s K91 million, with 60 percent of the incurred losses coming from motor accidents, workplace injury and death claims.
Among others, the national economic pressures coming from currency devaluations in 2022 and 2023, high inflation environment which led to an increase in claims costs, court awards and operating expenses contributed to the losses.
Insurance Association of Malawi president Dorothy Chapeyama was yet to respond to our questions.
But Scotland-based Malawian economist Velli Nyirongo said in an interview on Tuesday that low insurance penetration limits the ability of individuals and businesses to manage financial risks effectively and constrains the growth and development of the insurance sector, reducing its capacity to contribute meaningfully to the economy.
“This limits the sector’s potential to mobilise and invest capital in productive sectors, which could otherwise stimulate economic growth,” he said.
The insurance sector is crucial to the economy, serving as a vital channel for households and businesses to transfer risks to entities better equipped to manage them, according to experts.
The sector currently comprises six life insurance companies, eight general insurance companies, one re-insurance company, 24 insurance brokers, five agents for brokers (banks offering bancassurance services), 40 insurance agents (for general insurers), 494 individualised agents (for life insurers), 16 insurance loss assessors/adjusters, one insurance settling agent, and one funeral services insurance provider.
As at December 31 2023, total assets of general insurance in Malawi were valued at K88.9 billion while total assets of life insurance were valued at K1.3 trillion.
