Product innovation, right pricing crucial for insurance sector growth

The Rwandan insurance sector has been struggling to improve uptake for many years, and this year has not been different. Penetration is still low at just over 2.8 per cent and industry profitability stunted.
Bahizi believes the insurance industry has untapped potential which players should tap to drive penetration. (Courtesy)
Bahizi believes the insurance industry has untapped potential which players should tap to drive penetration. (Courtesy)

The Rwandan insurance sector has been struggling to improve uptake for many years, and this year has not been different. Penetration is still low at just over 2.8 per cent and industry profitability stunted. Yet, in spite of these facts, a new player entered the market in September. BK General Insurance, a subsidiary of Bank of Kigali, Rwanda’s biggest bank in terms of assets. Alex Bahizi, the BK General Insurance CEO, talked to The New Times about what the firm’s entry means for the local insurance sector and what the industry can do to improve its performance, among other issues: 

Tell us about BK General Insurance?

BK General Insurance was licensed by the National Bank of Rwanda in March 2016 as a registered general insurer. It is fully owned by Bank of Kigali Limited. It is a general insurance company because we don’t offer life insurance products.

By law, life insurance is registered and licensed as a separate entity. We started operations in September, with head offices at the Bank of Kigali old building.

Our entry means BK will be offering a one-stop centre for financial services.

Currently, we offer all general insurance products, including motor private and commercial comprehensive cover, and third party policies, and property cover against fire. We also offer transportation cover, medical for accidents and health, and engineering cover for plant and machinery, among others. We are working on new products that we will announce in the near future.

Rwanda’s insurance penetration remains low at 2.8 per cent. How do you plan to contribute to the sector growth?

One way of increasing insurance penetration is to improve public awareness. There is a wrong misconception that insurance is for the rich, which needs to be fought. Insurance is about avoiding risk to you, your property or business. It gives you assurance against uncertainties. It takes away your worries. One should have life policy, as well as cover your valuable items, cattle (animal insurance), crops (agriculture insurance), business, or your vehicle, and house, etc.

We are going to partner with stakeholders and conduct nationwide awareness campaigns about the benefits insurance cover.

Equally, you have to increase distribution channels to make your services easy and convenient for people to access, especially by employing ICTs. With technology penetrating every aspect of our lives insurers have no alternative but to embrace technology to ease service delivery and improve operations. We believe such interventions will enable the sector to reach more people and increase penetration.

On our part, we look to offer a whole new service experience to customers - an efficient, timely and seamless service. We promise a short, clear and customer-friendly claim process.

There has been a problem of price undercutting that is affecting growth. How will you survive such practices and stay competitive?

Our strategy is simple, but reassuring and is based on a number of key parameters. Firstly, we will apply standard and adequate premium rates that guarantee business sustainability in short and long-term. The industry agreed on sustainable premium rates sometime back, since then there has been a practice of price undercutting to attract customers. This makes business unsustainable.

BK General Insurance, we are not ready to join price wars. We shall apply standard and adequate rates and leverage service experience as our competitive edge. Secondly, we will underwrite businesses with relatively reasonable risk.

We are aware that insurance is all about taking risk, but there is always a way to mitigate risk in any business even when that enterprise is risky. There are a number of insurable businesses we shall not underwrite simply because their claim ratios are high according to industry statistics.

Thirdly, the company has to be cost effective. Our structures, resourcing, operations, investments and expansion are structured to care for cost management and efficiency in operations. We want to spend on what is extremely necessary and what will be productive and sustains the business. Lastly, BK General Insurance has a dynamic, energetic, youthful, experienced, skilled, professional and motivated staff to deliver its long-term strategies and sustainability.

Reports show that insurers are making losses, a reason many attribute to failure to pay claims. What is your comment on these issues?

I hinted on this issue in the previous responses. Insurers can avoid liquidity problems by pricing premiums correctly, as well as by designing innovative products that serve customer needs, control costs, employ robust IT infrastructure to sustainably support your business needs and hire the best team to own and execute your strategy in an efficient manner.

I want to assure the public that BK General Insurance is adequately capitalised and has a credible team to manage the company sustainably.

So, we are here for a long haul.

 

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