The country’s insurance industry is not performing to the expected standard because of the current economic turbulence, industry officials have said.
Speaking in separate interviews last Wednesday, President of Insurance Association of Malawi (IAM) Grant Mwenechanya and Prime Insurance Company Limited chief executive officer (CEO) Albert Mbawala said the sector is failing to grow this year because government is also facing financial challenges.
“We are swimming in murky waters economically and I believe no insurance company will perform according to expected standards this year,” said Mwenechanya, who is also CEO of Britam Insurance Company Limited in an interview.
On his part, Mbawala said since the private sector depends on government for business, the situation becomes volatile when central government is financially handicapped.
He said: “What we have seen this year is that customers are failing to pay premiums while some companies are reducing insurance covers from comprehensive to third party.
“Other insurance companies are cancelling policies for customers who are failing to remit premiums which is a big loss.”
Mbawala said some companies have embarked on self-insurance, hoping that any calamity does not befall them.
On reports that fraudulent claims are now on the rise, he said when the economy is bad, people look at the easiest way to make and save money and the insurance industry has not been spared.
“This is a huge problem because people create fake accidents, get fake police and medical reports and involve lawyers to force the insurance companies to settle a claim.
“We are hit hard by fraudulent claims and if the situation does not improve in the next one to two years, I predict that some insurance companies will be laying people off,” said Mbawala.
The situation of insurance companies has not surprised University of Malawi’s Chancellor College economist Ben Kalua, who said when businesses are not performing, it is difficult for them to generate revenue to pay as premiums to insurance companies.
“This is not surprising at all because our economy is in really bad shape. Turnover in most companies is low and there is depressed demand. If people do not have money, insurance is the last thing they will think of,” he said.
Insurance is a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation known as premium and it allows individuals, businesses and other entities to protect themselves against potential losses and financial hardship.