The insurance sector is in the news again for all the wrong reasons. Insurers were selling insurance cover on credit! This is besides the problem of price undercutting whereby some insurers sell premiums at giveaway prices to attract customers.
These vices are some the reasons insurance firms delay to pay claims, and affect the sector’s growth, according to the regulator. The unethical conduct is compounded by a host of other challenges, including lack of innovation and product diversification, and focusing on a small segment of the market, a KPMG study indicated in August.
The survey also discovered that products offered by local insurers do not meet customer needs, while customer service is minimal.
But how did we end up here?
Is it a question of laxity in supervision or is such unethical conduct symptomatic of far bigger challenges? The fact that underwriting profit plunged 61 per cent for the year ended June 2016, according to the National Bank of Rwanda (BNR) monetary policy and financial stability statement released in August, should be cause for worry.
The sector had lost Rwf4 billion through price undercutting in the first half of 2014. The writing is on the wall! The regulator, as well as Rwanda insurers association and other stakeholders must devise means to wipe out these vices to make the sector competitive to attract customers and new investments.
With a national penetration rate of about 2 per cent, the insurance firms and regulators’ work is clearly cut out. With these revelations coming at a time the government and its stakeholders are encouraging Rwandans to buy premiums, efforts should be invested in public awareness to win back customer confidence.
BNR and the local insurers body should work together to nip these costly malpractices in the bud.