INSURANCE regulators from across the East African Community (EAC) bloc have called on industry players to double their efforts to ensure the sector realises its potential.
According to the regional regulators, the sector, which is key to financial sector development, still faces a number of challenges that hamper its growth.
Bonaventure Sangano, the head of non-bank financial institutions at the National Bank of Rwanda, noted that the Rwanda insurance sector as a ratio of the total assets of the financial sector comprises less than 15 per cent, while the banking sector contributes over 50 per cent.
He said this was one of the reasons for the slow uptake of insurance services by the population. Sangano, who was speaking at the East Africa Insurance Supervisors Association meeting in Kigali last week, said the challenge is widespread across the whole region.
By the end of last year, only 1.6 per cent of the Rwandan population had access to insurance services. "One of the challenges we have as the entire EAC region is that people aren't aware of insurance," said Sangano.
He added that the entry of new insurance players into the region has not yielded much. They have not yet introduced new insurance products that meet people's demands like micro-insurance products.
"The majority of the people living in the rural areas need micro-insurance products."
Sangano urged insurers to have product diversity and also increase their channels of distribution in order to up penetration.
"In the banking sector, we have mobile banking. Insurers should come up with mobile insurance as well," he pointed out.
Insurance premiums not high
While many people have in the past been complaining of high insurance premiums as a reason why they don't buy insurance cover, Sangano said the fees are affordable in Rwanda.
He said competition for the few clients in the Rwandan market has created price undercutting by some of the firms, which has in turn led to low premiums for clients.
However, Sangano noted that the unfair competition in the sector has seen most firms post under-writing losses, with several of them calling for the central bank's intervention.
He said this mainly affected motor-vehicle third party insurance clients. He noted that a study has been carried out with a new set of price guidelines below which firms will not be allowed to charge.
Sangano said the above challenges and the lack of professionalism in the sector are the main reasons why the industry's growth is sluggish compared to other sectors of the economy.
Israel Kamuzora, the Tanzania Insurance Regulatory Authority chief executive officer, said it is important that people across the region change their cultural perceptions and start saving with the formal banking sector as well as take up insurance policies.
"If you go to the streets telling people to buy life cover to facilitate their funeral arrangements when they die, they won't like it because people don't want to be told about dying," he explained.
He complained that instead of individuals acquiring life insurance policies, their families often set up burial committees to raise contributions for funeral arrangements in case a family member dies.
"In countries where the insurance sector is strong and booming, people buy policies hoping to send their children to school; the insurer will pay for their education.
But in Africa you find people fund-raising to take a child to university."