Coun­try pro­file: Zam­bia

RISKAFRICA Magazine - - CONTENTS - Bianca Wright

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.

In­creas­ing com­pe­ti­tion

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.

Reg­u­la­tory hur­dles

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.

Prod­uct di­ver­si­fi­ca­tion

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.

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