Cars alone won’t drive out insurance losses

An actor in Rwanda’s insurance sector once told me that prayer is an important aspect of their business; I didn’t quite understand until they explained. "We pray for our clients so that they don’t incur losses or accidents that would require us to compensate them."

An actor in Rwanda’s insurance sector once told me that prayer is an important aspect of their business; I didn’t quite understand until they explained. “We pray for our clients so that they don’t incur losses or accidents that would require us to compensate them.”

The prospect of settling a major compensation claim terrifies most insurance firms and while they are happy to receive your premium payment, few are ready to be there for you when disaster strikes. A fight often ensues between the insurer and a client ending in long court duels.

Several businesses have gone under after suffering losses that their insurance firms were reluctant to compensate; this notorious record has dealt an almost irreversible damage to the insurance sector’s public image, possibly contributing to its current stunted growth.

The insurance sector also has a serious public communication problem. Apparently, few years ago, an important study was commissioned to investigate why the sector growth in terms of profit and penetration was stunted; the findings were damning but important.

But the industry sat on the report and assumed it was for in house consumption. In doing so, they missed an important public relations opportunity to massively communicate the report findings and win public understanding of the kind of challenges that were bedeviling them as an industry.

The sector needs help to establish and maintain mutually beneficial relationships with the public on whom its success or failure as an industry depends; the media is one key public the sector needs to make use of in informing and educating masses about its business.

After losing a communication opportunity of making a big story out of the report findings on the sector, they sat and decided to ‘start 2018’ with a bang! The industry chief executives collectively decided to announce a 73 percent hike in motor insurance.

First, the decision itself was wrongly announced through, apparently, a statement, meant to serve as a press release, was emailed to a leading daily and the authors thought it was enough.

Apparently, the statement itself was released after a reporter with a regional newspaper went calling, asking about the development he had picked-up from an industry insider. The article ran on January 7, 2018. The New Times followed on January 11, 2018; and now this debate…

Reactionary communication is bad for corporations and unless otherwise, organizations are advised to initiate the conversation and own the narrative following a well-thought-out proactive communication plan. But a weak corporate communications culture explains these mistakes.

For instance, two days ago, a senior official told a reporter that 14 tons of the Quran were set to be auctioned in Kigali after overstaying at Magerwa; clearly, they were unaware of the communication risk of the statement. The online version of the article has since been deleted.

It is obvious, that a fast-growing economy as Rwanda obviously needs a robust insurance sector; and robust, qualitatively not quantitatively. The number of licensed insurance firms increased from 14 in June 2016 to 16 in June 2017, says the Central Bank.

The latest entries were Mayfair in July 2016 and BK General Insurance, in 2017. But with an insurance penetration of barely 2 percent, one wonders whether the cake is big enough for sixteen players. This may explain the consistent loss woes and executive sackings in the sector.

Recently, the telecom industry self-corrected when one player acquired the other, effectively creating a duopoly. While this was not exciting news for consumers, it is a good development for investors. Perhaps a few exits, acquisitions and mergers could help save our insurance sector.

Innovation and diversity of product offering is the other factor that could turn around the sector. Focusing on mandatory car insurance and other covers is not only seemingly crazy, it is also lazy calculation especially if you look at the current vehicle statistics.

As of last year, there were just 186,000 registered vehicles including cars and motorcycles; only 156,000 of those, were active as of December (based on payment of mandatory fees). Of the active vehicles, 13,000 are said to be motorcycles leaving around 143,000 cars.

You’re likely to find these numbers surprising. That is why the insurance sector should move its focus from cars and invest in product research and innovation to widen its customer base to create new business and revenue streams to fill the current voids.

Insurance players may choose to pray for their clients to avoid compensation claims but they should also start looking at religion as a leading competitor which supports the very attitude that tend to stop people from signing-up for insurance policies.

Generally, we Africans prefer entrusting the safety of our lives and property to God/gods not insurance and the psychological role of fear is exploited by priests to ensure compliance. Most people I know fear to die, get disabled, lose a job, lose a house or anything they deem valuable.

The insurance industry has not exploited the psychological advantage of this fear to their favour; in terms of product development and marketing to increase insurance product uptake. Stop praying for clients and learn how to preach fear and consequences of not being insured.

The few cars on our roads won’t drive out losses in the insurance sector; product innovation and psychological/emotional marketing communication offers more value in the long-run. Start now.

Views, expressed in this article are those of the author and do not necessarily represent those of the New Times Publications.