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Ethiopia: Insurance Industry Booming, Unfair Competition Remain Threat
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The Daily Monitor (Addis Ababa)
3 December 2007
Posted to the web 3 December 2007
Biruk Girma
Addis Ababa
The Insurance industry in the country has shown considerable increase in premium production and has recorded an amount exceeding one billion birr- for the first time-but unfair price competition among companies in the industry remains to be a threat for the industry's further growth, Nib Insurance Company said.
The bank said had it not been for the unfair competition among the banks themselves, there was a big opportunity for the flourishing industry for a much exceeded growth and expansion than what has been achieved.
Some private insurance companies bear the burden of having to compete with other institutions providing the same service.
"The production volume could have been higher had there been fair price competitions between insurance companies which is becoming a serious threat for the growth of the industry," the Board of Directors of Nib Insurance Company (S.Co) said in its 2007 annual report released on Saturday at the Sheraton hotel.
The report said the high increase in the insurance premium production was attributed to the GDP growth in general and the economic boom in the construction industry in particular.
The company in its report said its market share for the national Insurance sector grew from 6% in 2005/06 to 6.5% in 2006/07.
During the fiscal year, the Nib has produced premium income of Birr 66.5 million showing a 42% increase from the preceding year and 33% from the company's budget, the report added.
Motor class of business has contributed 50% to the total premium production of the company for the year followed by pecuniary 15% and marine 11%, the report said adding the bank registered increase in all classes of business premium production.
"The company has been showing a continuous and significant increase in premium production and has also become successful in perpetrating the market and managed to have a vital role to play in the industry," the bank's report indicated.
The gross claim paid for the year amounted to birr 27 million, i.e 41% of gross written premium.
The lion's share which is 81% of the claim, payment goes to motor insurance followed by marine 8%. The overall loss ration for the year compared also been 64% which is less by 6.3% when compared to 70.3% of the previous year.
Nib Insurance Company registered a gross profit of Birr 7.5 million in the financial year. To this effect, net profit for the year reached birr 6.1 million which is a more than 13.5% increase as compared to that of previous fiscal year.
The company's paid up capital has increased from birr 25.8 million to birr 28.8 million registering an 11% growth, according to the report.
The Ethiopian insurance sector still has a long way to go and has not developed as quickly as expected following the introduction of a free market economy.
Experts in the field say despite the new pressure of competition, the government owned Ethiopian Insurance Corporation (EIC) which had been enjoying a long monopoly for years and other companies of the sector must act responsibly to nurture public confidence in the overall insurance market.
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According to available information from the National Bank of Ethiopia, there are only nine insurance companies operating in the nation with their 139 branches, a branch for 540,000 people nationwide.
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