What’s ailing local insurance sector?


Finance minister Claver Gatete delivers his remarks at the 42nd General Assembly of the Federation of African National Insurance Companies in Kigali yesterday. Timothy Kisambira

The local insurance sector has continued to perform below its potential, experts have said.

Yet, this is not unique to Rwanda; the situation is more or less the same across the African continent.

Among aspects that show that the sector’s performance continues to be below par include low levels of penetration, less than 4 per cent.

Despite an increase in the number of players on various levels over the previous years, little improvement has been felt in terms of real numbers.

Currently, the Rwandan insurance industry is composed of nine non-life insurers, four life insurers, two public medical insurers, 15 insurance brokers and 415 insurance agents.

Private insurers have particularly been registering poor performance compared to public insurers.

The Minister for Finance and Economic Planning, Claver Gatete, said that among the challenges that continue to plague regional insurers include low levels of financial literacy among the general population and lack of suitable products.

Other common challenges Gatete said include lack of skills among players, and cut-throat competition.

Gatete was speaking at the ongoing Federation of African National Insurance Companies that got underway in Kigali on Monday.

The challenge of low levels of financial literacy among the public, he said, require public awareness and new education approaches to change the mindset about insurance.

Suitability of products can be tackled through innovation that is responsive to the needs of the target market.

Innovation would also require increased competencies and skills among local companies and their staff.

Gaudens Kanamugire, the chairperson of the Rwanda Insurers Association (ASSAR), told The New Times that among the reasons for the sector’s continued poor performance is lack of awareness on the need for insurance among the population.

He said that a large section of the population continues to be oblivious to the relevance of insurance in their business or their day to day lives.

“One of our main challenges is very low awareness of the need for insurance as insurers, we have a lot to do to raise the levels of awareness through education,” Kanamugire said.

However, he said that raising awareness should not be a task for just insurers but it requires a hand by other sectors as well as policy approaches to rally the masses.

“We need to have it embedded in the education system to ensure there is deeper understanding. For instance, if you speak to most graduates, few have a sense of the need for insurance in the economy,” he noted.

He admitted that the level of innovation was also relatively low in the sector, largely due to level of skillsets in the country at the moment.

“We are still a very young market, even if you count the number of professionals to the extent that we need to train more to have increased innovation,” he said.

Increased innovation would see an increase in the number of products in the local market giving clients a wide range of options.

“There is a huge opportunity in the mass consumers. This, however, requires cheaper products that are micro in nature, so that anyone can afford it. That would increase penetration as we would cover farmers and other people in the village,” he said.

The sector could also achieve increased penetration by embracing technology which would improve their interaction with clients and potential clients.

Other tasks required to improve the sector is ridding the industry of malpractices.

Among the long standing malpractices are cases of pharmacies and garages who worked with insurers as well as unpaid claims.

To address this, Kanamugire said that that they are well aware of the situation and are working to address it.

“If we follow the agenda we have designed, we will be able to curb internal fraud, fraud by garages, pharmacies and operators. We are building a database whereby anyone attempting malpractices will be locking themselves out of the system and can be detected easily,” he said.

In a recent interview with this paper, Governor of the National Bank of Rwanda, John Rwangombwa, said that the sector began showing a positive turn in September last year in terms of capitalisation.

“In terms of the biggest challenges has been capacities within the insurance companies, their staff; we do not have any enough expertise in actuarial science which has been a challenge in terms of capacities!..

“The other is negative practices within the insurers such as undercutting prices, now the association is coming up with practices to reorganise themselves and are working to remove negative competition,”Rwangombwa had said. The central bank is the sector’s regulator.

During his speech to the African insurers who are meeting in Kigali for their 42nd General Assembly, President Paul Kagame said that despite the current bleak picture of the industry at the continental level, there was hope in the growing middle class on the African continent.

This, he said, is potential market that should be tapped.