Economy failing insurance sector
Captains in the insurance industry have said the economic hardships that Malawi is currently facing is negatively impacting on the sector as it is struggling to grow.
In an interview on the sidelines of the opening of the Institute of Insurance in Malawi (IIM), one of the trustees of the institute, who was also guest of honour at the function, Eric Chapola, said as a result, players and stakeholders in the industry should expect a gloomy year ahead.
“The economy itself is going through bad times, as a result, companies are not producing as they should have been in a stable economy, as a result, there are also no new investments coming forth. Cash is tied, therefore, our customers are finding it difficult to revise their insurance upwards.
“We write insurance policies on declaration of assets and our experience is that clients are reluctant to make declarations because they don’t want to pay more premiums. People are now coming to insurance companies to cut their expenses by negotiating for cheaper rates, cheaper premiums and in so doing, our premiums are going down,” said Chapola who is also chief executive officer for Nico General Insurance Company Limited.
Chapola also said the coming of a new player in the industry, CIC Insurance Company from Kenya, has worsened performance in the industry, saying new firms always bring more changes as each firm would want to offer cheaper rates and premiums to attract customers.
As a result, Chapola said to keep their clients, the old insurance companies have to either agree to charge the cheaper rates that new entrants in the industry are charging or agree that the rules are different, which challenges growth.
However, to survive the harsh economic environment, Chapola said there is need for industry players to charge risk appropriate premiums and also take into account interests of their shareholders.
“Players need to realise that a business venture is not a charitable organisation. They need to charge premiums that are risk appropriate and also companies need to be aware that they have shareholders who must receive dividends. At the same time, they should realise that their shareholders have several alternatives—they can choose where and when to invest.
As companies, we must be in a position to offer good services to customers in a win-win situation,” he said.
He, thus, called on government to ensure that there is an enabling environment for businesses to prosper and woo new investors by, among other things, creating an enabling registration for setting up a business and also help in alleviating the problems of power outages that also scare new investors.
On the workshop, Chapola said that the coming in of Equity Re Insurance Brokers (Training Division) in the sector is a welcome development and a necessity for the growth of the sector.
In his remarks, IIM president Rex Kadzongwe said for the industry to grow there is need for more skilled and qualified professionals, hence the need for a training division.
Kadzongwe said the institute has since intensified awareness and civic education programmes to curb fraud and also to increase insurance penetration in the country, which is currently very low.
