A lack of initiative by workers and leaders has been singled out as the fundamental reason for the drop in profits of the Ethiopian Insurance Corporation (EIC) in the first six months of the fiscal year.
However, professionals on condition of anonymity told The Reporter that this reason does not make economic sense.
The corporation planned to generate 271.5 million birr in the six month period, yet actual figures reveal an amount of 106.8 million birr, 59.2 percent of the target.
In a press conference last Friday Sintayehu Woldemichael, director general of the government's Financial Institutions Regulatory Agency, said among the reasons that the corporation did not achieve its plans was the reduction of premium sales incomes, coupled with the corporation's higher expenditure.
Journalists explained that they understood profits for insurance corporations are mainly related with the sale of premiums, and asked the director why the sudden decline in profit? Why the drop in premiums? Is the competition in the sector a reason? And so on. The director explained that the decline of premium incomes and the increment of expenditure are the general reasons, and at the same time blamed the corporation's workers and leaders for the poor performance.
Basically, staff initiatives to collect more premiums gathered lower yields, yet the director pointed out that to identify the genuine problem would require a deep examination of the balance sheet.
Sector professionals told The Reporter that the reason given by the regulatory agency is not economic, and criticized the justification.
The professionals argued that the level of profit in the insurance sector is measured by the collection of premiums and the balance in payment of liability, therefore the reason presented by the agency "initiative" is not related to the nature of the sector.
They said that the decline might occur due to the increment of compensation, one of the problems of the policy.
The government's Finance Institutions Regulatory Agency controls four financial institutions: the Ethiopian Insurance Corporation (EIC); the Commercial Bank of Ethiopia (CBE); the Development Bank of Ethiopia (DBE); and the Construction and Business Bank. These four institutions secured a profit of 5.62 billion birr in the six month period, 98.4 percent of the plan. The CBE takes the lion's share, 82.57 percent, while the DBE earned profits of 357.2 million birr and the Construction Bank 61.6 million birr.