AFRICAN insurance regulators last week converged in Harare to discuss how collaboration can facilitate innovation in the sector for growth. This comes as Africa’s insurance industry is the second fastest growing market in the world with a 6% annual growth rate. The event was organised by African College of Insurance and Social Protection in collaboration with the Zimbabwe’s Insurance and Pensions Commission (Ipec) and the Organisation of African Insurance Supervisory Authorities (OAISA). Our senior business reporter Melody Chikono (MC) spoke to OAISA president Sunday Thomas (ST) after the conference. He said there were opportunities for growth in the region’s insurance sector. However, he said African countries, including Zimbabwe, have their own peculiar challenges that require an African approach to tackle. Below are excerpts of the interview:
MC: May you give us an overview of the just-ended conference?
ST: Insurance is a knowledge-based industry. Therefore, capacity building is central to what is good to take us to the next level. This year’s retreat was looking at different aspects of our operations. These are reinsurance and capacity on the African continent, how to collaborate, as well as (how to leverage on) technology. Insurance must take its place in the committee of financial service providers. And we must work on the supply side, as well as other aspects that will make Africa’s insurance sector competitive. Regulators must sensitise the market so that we create high levels of traction for Africa’s insurance sector. Operators (insurance companies) must be able to settle claims as and when they are due to avoid disappointment and enable citizens to see the benefit of insurance. This is a very big market, and I believe before we start to share our business with Europe, we must share amongst ourselves.
MC: How should this be done?
ST: The first port of call is to make sure our capacity is able to fill market gaps. We should be able to collaborate extensively and invest in high yield instruments, not just within individual countries but across countries and be able to relate with excess funds that we have in our portfolios. We must begin to see how we can help establish subsidiaries that put less pressure on the need to undercut risks. If you are having sufficient funds and you are able to make good returns to your shareholders, there will be less pressure on cutting of risk. These are my perspectives on this retreat.
MC: You have talked about undercutting. What can you say has been the major causes driving this in Africa?
ST: The kind of competition that is not based on service, but pricing leads to undercutting of rates. We should compete on service delivery, not on prices.
MC: You didnot talk about externalisation of risk
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ST: As far as I am concerned, when it comes to the issue of pricing of risk, there has to be proper evaluation. There has to be what we call portfolio management. Our reinsurers must also help us here. They must not allow direct underwriters to dump on them risks that are not adequately written. That will control undercutting.
MC: The conference was under the theme “Innovation for Smart Insurance for Africa”. What inspired this theme?
ST: As Africans, we have our peculiarities in terms of how we live and how we relate with one another. Innovation is going to bring out the best. Research must be big to know what products are attractive to our policy holders. However, you know that the perception of insurance in Africa is not good enough. We must first create awareness, change psyche and people’s thinking towards insurance. That will open a lot of doors. (For now), we are performing far less below our potential as the African market.
We can explore this by creating the needed awareness. Let the people know how they can use insurance to meet their daily and their future needs. If we are able to do this, the insurance sector will be the next industry to drive our economies.
MC: How do you rank research levels in Africa’s insurance sector?
ST: We are still lagging. We are not doing enough. If we were doing enough, this would manifest in the kind of products that we are offering. We would see new products coming up as a result of our research. We must not bring products from Europe to this market. We must be able to bring products that are peculiar with our people.
MC: Let us talk about regulation in African insurance markets.
ST: We are striving and trying to get there. But we are still some steps away. It is not actually too difficult for us to get there. The International Association of Insurance Supervisors should set the standard for regulations globally. Thank God that now we have OAISA, which is becoming stronger by the day. I believe we should be able to leverage on that platform and I want to use this forum to call all regulators across Africa to be part of OAISA because it is ready to support each of our individual regulatory institutions.
The African College of Insurance is creating that immediate platform for us to exchange ideas and that is why you are hearing some of these discussions that we have been getting here today.
MC: What would be your comment on Zimbabwe insurance industry?
ST: The commissioner of (Insurance and Pensions Commission (Ipec) has been doing a good job here, on the African continent and the committee of regulators. We quite appreciate all of her contributions to regulation on the African continent. I know that Zimbabwe is very strong in the area of agriculture so that has to be emphasised on.
There is what we call competitive advantage. You take all of your competitive advantage, strengthen it and make it big. That is what works.
In Nigeria for example, oil and gas is a major area for us as well as our population. In Zimbabwe, you have agriculture. You can leverage on that. I have seen a number of products being developed around agriculture. It is a good starting point.
In Zimbabwe you are lucky because you have a regulatory board that combines both insurance and pensions.
I believe so much can be done with this market to make it bigger than what it is, and I think through regulatory intervention and initiatives it will become bigger and better.