Country profile: Zambia
Zambia, driven by its mining, agricultural and tourism industries, represents an intriguing opportunity for insurers, reinsurers and brokers looking to expand their Southern African operations. What does Zambia have to offer in terms of its insurance sector and what potential pitfalls should insurers look out for when considering expansion into Zambia?
Following the reforms of the early 1990s, the State- owned Zambia State Insurance Corporation (ZSIC) no longer holds a monopoly on the industry. Despite this, it is still the largest player in the sector. Other than ZSIC, nine general insurance companies are licensed to operate, as well as five life insurance companies. Also licensed are two reinsurance companies and numerous brokers and agencies.
International links are strong, with some of the larger companies operating in Zambia obtaining insurance cover from insurers outside Zambia, especially in South Africa, according to the Commonwealth Network. International insurers, reinsurers and brokers, including Aon, Marsh Africa, Hollard and Norwich, also have significant presence in Zambia.
Zambia’s position and stable political situation has made it an attractive market for insurers like Hollard. In May last year, Hollard announced that it would be opening a life insurance office in Lusaka. At the time, Hollard CEO Nic Kohler said, “Ever since we embarked on our Southern Africa expansion drive, we’ve known that Zambia would be an important market for Hollard. We have worked hard to develop relationships there in anticipation of our Zambian market entry.” He added, “Our entry into Zambia demonstrates our approach to international expansion, which is to establish a skilled and experienced local presence backed by a powerful global network of licenses, professionals and capabilities. This allows us to truly understand the markets in which we invest.”
Later in 2012, Metropolitan Zambia introduced its new insurance package dubbed Metropolitan Life Zambia, which includes group life, permanent and total disability, permanent health insurance and health insurance cover.
More to do
While these new products and investments signalled increasing interest in the industry, many believe that more needs to be done to truly reach the potential of Zambia’s insurance sector. At the Metropolitan Zambia launch, Pensions and Insurance Authority (PIA) Deputy Registrar Muyoya Chibiya bemoaned the low penetration of insurance companies into the Zambian market compared to other markets, reported i-Zambia.
“We hope that you will bring your expertise in providing quality life insurance services from other countries in which Metropolitan operates and localise to meet the insurance demands of local Zambians,” Chibiya said. He stressed the need for insurance, both life and non-life, and highlighted the need to create greater awareness among Zambians about the value of insurance. The findings of the 2009 Finscope Zambia survey (the most recent survey carried out in this sector), noted that awareness of financial terms such as ‘insurance’ and ‘premium’ is generally very low across the market, with the exception of the salaried urban market.
The PIA noted in June 2012 that only three per cent of the insurable population is currently insured. In fact, insurance figures fell between 2005 and 2009 according to the Finscope Zambia survey. In a speech by PIA registrar Martin Libinga, he urged brokers to grow life assurance in Zambia, noting that brokers contributed about 30 per cent of the overall gross premium written in the life assurance industry in 2011.
The importance of brokers in the Zambian insurance sector was echoed by Madison Life Insurance Company Zambia (MLife) managing director Agnes Chakonta. At an awards ceremony honouring the top brokers in the country, she said that the insurance sector cannot operate effectively without the support of intermediaries who are mainly brokers, and that 90 per cent of insurance in Zambia is mostly handled by brokers. “We recognise the important role that the intermediaries play not only as a key distribution channel of insurance products, but its interface between the insurer and the client,” Chakonta says.
Opportunities seem ripe for the taking and the insurance sector is well-developed. Regulatory and industry representation is solid with the Pensions and Insurance Authority as the regulatory body, the Insurers Association of Zambia as the industry body and the Insurance Institute of Zambia as the professional body for insurance practitioners.
Insurers have sometimes found themselves in opposition to government plans for the sector. In 2011, for example, the Zambian Government announced the introduction of VAT on insurance premiums as a way of increasing government’s revenue collection. The outcry was vehement, with many industry experts describing the tax as an affront to the growth of the insurance sector in the country. Acting chief executive officer Christabel Banda of Diamond General Insurance noted, after the announcement of its 2011 results, “The insurance industry growth slowed down in 2011, though the growth was still above inflation. The slowdown was generally attributed to the introduction of VAT as the industry struggled with its implementation due to the unique nature of the services provided and the different players in the supply chain”.
According to the Microinsurance Network, ALAZ has partnered with MtN Zambia (MtN) to enable MtN customers to buy affordable and convenient life cover.
Recognising the need to create products tailored for the market, many insurers have diversified their product offerings, especially in the area of microinsurance. The Microinsurance Network reported on two new product offerings during 2012. Professional Life Assurance Limited introduced its Bantubonse Life Plan, a simple and affordable life plan with a minimum one-off annual premium of ZMK30 000 (US$ 6) for a sum assured of ZMK1 000 000 (US$ 205). This has put insurance cover in the hands of Zambians who previously would not have been able to afford it.
Similarly, African Life Assurance Zambia’s (ALAZ) Life after Life product caters to the lower end of the market and is the first insurance product ever to be offered in Zambia using a mobile phone platform. According to the Microinsurance Network, ALAZ has partnered with MTN Zambia (MTN) to enable MTN customers to buy affordable and convenient life cover for as low as ZMK1 500 (US$ 0.3) per month for a pay-out of ZMK1 000 000 (US$ 205).
Other innovative product offerings included Old Mutual’s single premium, pre-paid insurance product launched in November 2007 and distributed through Shoprite Checkers.
The 2009 Finscope Zambia survey found that affordability dominated reasons for not having insurance among those surveyed who said they know what insurance is. Awareness was also highlighted as a key barrier to insurance uptake. The survey noted, though, the scope for growth among the urban salaried market.
It seems that the need for innovative, forwardthinking insurance products tailored to the Zambian market, combined with increasing awareness drives, make Zambia a solid potential growth area for insurers.