Yemisi Izuora/Agency Report
Tanzania’s insurance industry is projected to reach $400 million annually in 2018, up from $300 million in 2015, a new study shows.
In its latest report, Ernst & Young (EY) predicts that the growth will be fuelled by players’ new product lines and territorial expansion including the coming of sharia-compliant insurance products and the use of banks to sell indemnity covers (banc assurance).
The report, known as ‘Waves of change in Insurance’, is borne from a survey that was conducted in 125 companies and regulators in the Sub-Saharan region.
The Ernst & Young Country Managing Partner, Joseph Sheffu, said that out of the seven markets in the report, Tanzania’s pace of growth is ranked in fifth place, ahead of Malawi and Kenya.
With growth rates of 11 per cent, 10 and nine per cent for Zambia, Nigeria and Ghana respectively, the three countries are the highest growth markets.
“Insurers clearly see the opportunity to introduce more lines of business in Tanzania and grow their territorial footprint outside of urban centres. This is great news for Tanzanians,” said Sheffu.
He said that 69 per cent of Tanzanian survey respondents expect to develop new product lines over the next 12 to 18 months whereas only 45 per cent of Kenyan and 54 per cent of Zambian insurers expect to do the same.
Key on insurers’ agenda is the selling of sharia-compliant insurance products to Muslim communities as a growth opportunity.
According to Sheffu, Tanzanian financial institutions are also looking at a potential change in the legislation around banc assurance (insurance sold by banks) to drive a wave of product innovation.
He said after product and territorial expansion, Tanzanian insurers are most focused on organic expansion.
“In fact insurers, in all the countries surveyed, cited organic expansion in their top three strategies… .there are also a number of international insurance companies looking at opportunities for acquisition so we think that M&A (merger and acquisitions) is likely to be a factor in future growth plans for the region. Tanzania is on the radar of most insurers we talk to,” he said.
Technology is going to be a differentiator for Tanzanian insurers and in other countries within Eastern Africa while in Ghana and Nigeria technological change is not in the top three drivers of growth. Instead in West Africa, consumer demand, regulatory change and competition are spurring on advancements.
Sheffu said that insurers in Tanzania are responding to the demands of technological change through innovation. “In Tanzania the top two areas of innovation, being looked at, are mobile underwriting and mobile claims processing,” he said.
Sujay Shah, East and Central Africa Insurance & Actuarial Advisory Leader, says “Clearly Tanzania, and the East African region, is focused on technology and the mobile in particular. Consumers are increasingly comfortable transacting on their phones and mobile will be a critical channel for Insurers looking to fulfil their objectives of growing their rural footprint.”
The EY report cites four key technological tools as being critical for insurers looking to leverage technology: Digital underwriting for selling/renewing policies, digital policy purchase platforms, digital claims payment and finally, back-end IT infrastructure to handle data analytics, warehousing and risk-based pricing.
Shah says, “Getting the technology right is both the biggest prize and potentially the biggest challenge for insurers. There is a shortage of talent right across the industry in technology – that applies in supposedly mature markets too.”