MICRO-INSURANCE has been cited as a significant instrument for delivering effective and efficient insurance services for people in the low-income bracket who are vulnerable to various disasters - both natural and man-made.
In the absence of microinsurance schemes, the poor get caught up in poverty traps from which it may be impossible to escape. When a crisis occurs, the poor may consume or sell all the assets in possession such as livestock in order to solve the problem. A recently published study on African micro-insurance markets shows that the number of low-income households benefiting from insurance services has grown significantly in the last three years.
"Despite challenges posed by poverty among low income earners, Tanzania has demonstrated to have a fertile soil for the growth of micro-insurance market in Africa, said Mr Israel Kamuzora, commissioner of insurance and Tanzania Insurance Regulatory Authority (TIRA) chief executive officer (CEO).
Although many Tanzanians still live below poverty line of what the World Bank (WB) maintain as 1.25 US dollar a day, the country has proved to have the fastest growing insurance market with a growth of 24 per cent, above an average of 15 per cent for most developing nations, as well as three times more than the country's Gross Domestic Product (GDP).
Mr Kamuzora made the remarks at a press briefing ahead of the 8th International Micro-insurance Conference that took place last week in Dar es Salaam. It was the 8th micro-insurance meeting but the 3rd to be held in Africa that brought together 500 participants from 62 countries. Tanzania qualified after meeting the criteria set by insurance experts following a study carried early this year.
Mr Kamuzora said it is not an easy task to carry through the micro-insurance subject among the poor individuals. It is always difficult to tell a poor person to pay for insurance package instead of buying bread to feed the family. But the same persons said to be poor, Mr Kamuzora said are the ones owning mobile phones and making the telecom firms transactions high.
Thus it is an opportunity for the insurance industry to penetrate their services among the same individuals.He said the microinsurance sector is developing at a steady pace. "With 3.3 million people covered by micro-insurance, which represents a growth of around seven per cent in three years, TIRA has been focusing its efforts on raising the awareness and benefits of insurance amongst the poor, as well as working together with Access to Insurance Initiative (A2II ) to stimulate the market through new regulations," said Mr Kamuzora.
Mr Kamuzora noted that the key players in driving microinsurance include micro-finance institutions such as Savings and Credit Co-operative Societies (SACCOs), Vikoba, Pride and mobile phone service providers including TIG O, Vodacom and Zantel. He said the telecom firms have agreements for various insurance packages payable through airtime and other means.
"This is working very well," Mr Kamuzora explained. Another scenario showing positive growth of the sector is the concerted effort put by the regulatory body and other stakeholders in the past three years to ensure that customers' claims are settled on time. "It is currently rare to hear someone complaining over unpaid claims," he observed. The outcomes of the meeting, according to Mr Kamuzora, will revolutionalise the insurance industry in the country by bringing in more players into the sector.
The NIKO Insurance Tanzania Limited Chief Executive Officer, Mr Manfred Sibande, said insurance industry is urban- centred leaving rural areas isolated. The study on whether Africa is viable for micro-insurance market carried by the Making Finance Work For Africa (MFW4A) and Munich Re Foundation, established that during the last three years over 44 million people have benefited from insurance services, which reflects a growth rate in the excess of 200 per cent. "This is a tremendous achievement.
The expansion of quality insurance services to large numbers of low-income households can have a significant role in achieving the Millennium Development Goals (MDGs)," says an expert with ILO, Mr Craig Churchill, who is also the Chairperson of the Micro-insurance Network. MFW4A Partnership is an initiative to support the development of African Financial Sectors. It is a unique platform for African governments, the private sector and development partners to coordinate financial sector development interventions across the continent, avoiding duplication and maximizing developmental impact.
The MFW4A has its secretariat at the African Development Bank (AfDB) headquarters in Tunis, Tunisia. "One striking issue highlighted in the study is that the vast majority of Africans with insurance coverage, that is to say, close to 40 million people, are covered by life insurance. Partnership Co-ordinator of MFW4A, Mr Stefan Nalletamby, said the other insurance products, related to health, agriculture, accident and property, are not as developed on the continent, which is inconsistent with the demand, especially for health insurance.
In geographical terms, the study noted that over 38 million of the insured people are concentrated in Southern and Eastern Africa, with South Africa alone covering 27 million.