Tanzanian insurance market set for major change to protect policyholders

Tanzanian brokers are preparing for a major change in their business model as the insurance commissioner and government work towards a new insurance act, which will mean premium payments go straight to insurers, instead of to the brokers. Speaking at the Tanzania Insurance Brokers Association (TIBA) second annual conference, Israel Kamuzora, commissioner of insurance for Tanzania, warned brokers they must face up to the changes ahead. He said the move has been driven by the failure of all brokers to pass on premiums to the insurers in the past, which has led to problems in terms of claims settlement and, ultimately, to insureds losing out.hideThe commissioner said it is vital that insureds are properly protected, particularly as the government tries to drive insurance penetration rates in the country upwards. Mohammed Jaffer, TIBA president, acknowledged there has been a problem among some brokers but he said it is not the same for all and there is a danger that the new system will make it difficult for the brokers to survive. “If the premium is to go to insurers,” he said, “then we must also have protection to ensure that our commission is paid within a set number of days.” Mr Jaffer acknowledged that, with some 140 brokerages, Tanzania probably has too many brokers for the size of the market and he said the Association has been discussing the way forward with Mr Kamuzora. “We have some 140 brokers in Tanzania but only 40 account for anything between 70%-90% of the business – the rest are just disruptors,” he claimed. The expectation is that, under the intended regime, there will be plenty of mergers and acquisitions to shrink the market to a more appropriate size. As part of his conference opening, Mr Jaffer had also called on insurers to support the local brokers more actively, through training and sharing of expertise. He said the market needs to build capacity and that will only come from gaining technical expertise. “Would you rather not have a broker who can understand and then who can sell properly to the market?” he asked. “The underwriter who invests will reap the benefits. We urge you to ensure our clients get the service they deserve.” Mr Jaffer believes the success of the TIBA conference, growing to some 160 delegates this year, is a sign of the improving market cooperation and said it will be something the Association wants to work on further in the coming year. He said small steps of change will lead to a giant leap in terms of the service and delivery that insureds will receive, but he added it is crucial for the market to work together. Leaders of the East Africa Brokers Association attended the conference in Zanzibar – further signs, said Mr Jaffer, of growing regional cooperation. Mr Kamuzora urged industry players to work together still further and to stop blaming the regulator for everything, anytime something goes wrong. “We are trying to shape the future of our insurance industry along lines of excellence and to drive excellence through the sector,” he said. However, he warned brokers they must also change their business models if they are to survive into a long-term future. Pointing at the way the existing market operates, Mr Kamuzora said Tanzanian brokers tend to concentrate on the general insurance side of the business, rather than on selling life or health policies. Within the general insurance market, he said the picture that emerges is that few brokers sell engineering or marine policies and rarely take advantage of the emerging oil and gas business in the region, or the growing aviation market. Instead, they prefer to sell motor policies. However, warned Mr Kamuzora, more developed insurance markets have seen a switch from broker sales to internet or consolidator sales, which ultimately could happen in Tanzania as new technology is embraced yet further. This would potentially wipe out some 60% of the existing broker revenue, yet he sees little sign of the brokers changing their habits. He urged brokers to engage with the Institute of Financial Management and to bring more qualified insurance experts on board to help map out a better future. He said there are too many signs of “slackness of internal controls” and he would like to see better data collection so brokers maintain better records. Not only would this help improve the relationship with insurers but it would also help the brokerage analyse trends and be in a position to adapt to changing market conditions. Another key challenge for the market is on pricing. Mr Kamuzora advised the brokers that it is time to stop simply undercutting each other on price. Apart from anything, without sufficient information to hand, the brokers will struggle to know if they are selling at loss-making levels. But Mr Kamuzora said they need to stand firm on pricing and offer value for money, rather than just lower costs. “Cheap is not always best,” he said, as he called for greater transparency on commissions so customers understand what they are paying for. Being a broker, he said, does not stop at collecting a premium but instead should be about end-to-end service, from finding the appropriate policy all the way through to claims settlement. Tanzanian brokers also face challenges in terms of competition from unlicensed brokers and that is something that Mr Kamuzora wants to stamp out. “They are stealing your business,” he said. Overall, he said, the key will be incorporating strong risk management principles into the brokerage. Brokers need to look at governance risk and compliance, taking it to the next level. “There is no business without risk but you can’t exist in any business if you are not compliant,” Mr Kamuzora stressed. “Neither can you exist if your governance structures are not proper. Usually, we perceive risk as being negative but it can be positive – there is a downside and an upside to all risks. Take, for example, jaywalking. It can save you time, which is an upside of the risk, but it could get you injured too, which is negative. “Risk management is a coordinated set of principles, rules and responsibilities that will enable you to control the activities of an organisation in the light of the risks it is facing. It is the only way to learn the lessons of the past and be fit for the future,” he concluded.

Tanzanian insurance market set for major change to protect policyholders

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