Malawi’s economic and marketplace developments suggest a continuation of challenging and highly competitive conditions for the country’s small but growing insurance industry.
Faced with turbulent economic conditions (both globally and locally), high unemployment rates and low GDP (gross domestic product) rates,among other challenges, business risk and uncertainty remain high, thereby presenting a market that is confronted by contradictory signals of opportunity and challenge.
While market demand, for example, is evolving albeit at a slow pace, competition is increasingly high, driven by the accelerating influence of large multinational and global participants and an increased number of contestants on the local scene.
Currently, the penetration of life insurance in Malawi is only at 2.2 percent. This is quite low given that the country’s population currently stands at about 16 million.
Among the several factors that affect the penetration of life insurance in Malawi and most developing countries is the lack of disposable income among the citizens.
In a country where many people live below poverty line, it is difficult or almost impossible for people to think about setting aside insurance money in the name of future security when they are struggling to put food on the table.
Life insurance is considered a luxury and, therefore, rarely forms part of most households’ budgets. This is the case in most African countries, including Malawi, where insurance is seen as a rich man’s product.
With high poverty levels, a majority of the population do not have enough disposable income to purchase insurance products because for many, life is inevitably about basic needs such as food, shelter and clothing.
The high cost of insurance premiums does not help matters. With a majority of people lacking disposable income, it can argued that the few that can afford, only small amounts of money can be set aside for insurance products and the impact of such on the insurance industry can be anybody’s guess.
Then there is the assumed complicated nature of insurance products, which coupled with a lack of knowledge and information on insurance matters affects the rate at which insurance products can be accepted by consumers, making it hard for the industry to grow.
Insurance is considered a complex topic the world over and not many people understand its necessity or benefits no wonder it is not considered by many people or is always last on the shopping list of the few people that purchase insurance policies.
Until today, Malawi has people—probable customers of insurance products—who look at insurance as a form of gambling; others consider it legalized theft; others understand it as a form of tax ; while others just don’t trust insurance companies with their hard-earned money. Such people doubt the possibility of insurance companies living up to their promise of paying in the event that their property gets damaged.
In the case of life insurance, some people still struggle to discuss or consider their own death whereas others are uncomfortable with the idea of building up funds to be enjoyed by others when they are long gone.
Another challenge facing the industry is the common complaint among insurance customers who claim that insurance companies are slow in settling claims. When an insured event occurs, insurance companies have been slow in processing claims. This has eroded the already shaky confidence customers have on insurance leading to slow growth of the industry.
With the myriad challenges facing the industry, one wonders as to whether insurance companies will continue to walk the tight rope or turn the challenges into business opportunities.
The above stated misconceptions and worries among insurance customers, point at an information gap between players in the insurance industry and the people. Have insurance companies dedicated enough time and effort to educate the masses about the meaning and importance of insurance?
There is, therefore, an urgent need for insurers industry to educate the masses about the field. The many questions and uncertainities in people’s minds can be turned into an opportunity for insurers to sell and grow their portfolio beyond the popular motor vehicle insurance which has proved unprofitable but remains “well-liked” because it is compulsory.
A key challenge for insurers is, therefore, to improve on communication to increase awareness among consumers and improve the industry’s low trust by integrating distribution and communication channels and providing more transparent information.
Providers of life insurance also need to make their products easier to understand and compare, apart from making transaction processes more efficient.Insurers need to work on simplifying the language on their policy documents, most of which are very technical, so that policy holders can easily understand them.
Insurance companies can further translate policy documents in local languages that people are comfortable with other than sticking to English in a country where literacy levels are low. Such a move could also help in changing the perception that insurance is only for the rich and educated.
The public also needs to be enlightened about other equally important insurance covers apart from motor insurance. Examples of such insurance covers include premiums for buildings, office equipment, funerals, business, pensions and life.
It is always sad to see families of deceased employees fighting with management on some benefits, especially during funerals. These embarrassing incidents can be avoided if companies and people are properly educated about funeral or life, which take various burdens away during and after funerals.
Insurance companies might also need to push and market policies that provide for both risk coverage and a savings component because that what the customers prefer.
Insurers could also explore the possibility of lowering the cost of premiums, improve on efficient claims settlement and customer service and have country wide presence to improve the penetration of insurance in Malawi by breaking into underpenetrated markets with new products and tailor-make the products to suit everyone.
In this era of technology, insurers also need to consider the value of digital platform in enabling the sharing of information with and among intermediaries and consumers to enhance customer experience and enable self-servicefeatures.
In the end, an improved insurance industry not only benefits the consumer and companies, but also the country’s economy. A vibrant insurance industry can undoubtedly contribute to the growth of the economy through taxes and the protection of businesses and assets.
- The author is a Branch Manager for Britam Insurance Limited but is writing in his personal capacity.
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