The insurance industry in Zambia is competitive, with over 25 companies currently operating. How would you describe the business landscape for companies, and is there the potential for consolidation?
The insurance industry has seen significant growth in terms of the number of companies and those with licenses. There is an increased interest in the industry, and there are many applications currently being processed for new insurance businesses. Generally, the economy has been doing well, and so amid rising GDP a number of businesses have felt the nation's potential across various sectors. With a growing economy, there needs to be proper insurance infrastructure to support business. Among aspects precipitating growth are our low capitalization requirements, which have made it easier for players to enter the market. Consequently, we anticipate the government issuing new guidelines and standards for these new entities, as strong entities provide greater security for their policyholders. When the statutory requirements for capital are issued by the ministry we will likely see consolidation and companies listing on the capital market. There is already interest from insurance companies to be listed, and we anticipate companies injecting more money to reach their required capital levels. As a result, we anticipate more protection for policyholders, which would be good for the industry and economy alike.
Do you see predominately international or domestic interest?
We see international interest, but there are also local players wanting to enter the market. The challenge lies in accessing finance, but the interest is there.
What steps is the PIA taking to increase insurance penetration, which remains at 3%?
Last year, one of our strategies was related to micro insurance, while the other was related to financial literacy and education. In order to encourage people to take up insurance and appreciate the need for it, especially in areas such as agriculture, tourism, and SMEs, we are engaged in a wide range of activities. We expect to see increasing insurance uptake and subsequent rising penetration levels.
What role does innovation play in broadening the insurance market?
Technology provides a platform for insurance to be made accessible to quite a number of people. We need more innovation, especially for technology to extend our reach; this is one area we are trying to properly regulate as an authority. Providing a product is one thing, but in terms of regulation, we want to ensure that subscribers are getting their claims paid.
What are the specific steps that should be taken to improve access?
This is one of the hindering areas in need of improvement. If there is a tax on insurance, the policy becomes less affordable to the man on the street. The government needs to alleviate the tax on certain types of insurance in order to increase access, especially in terms of micro insurance. This is the area through which we are trying to reach the mass market, and we trust that the government will adopt a favorable position and eliminate the tax.
Are there other ways to encourage and incentivize micro insurance?
Insurance companies, as business entities, can become more innovative by embedding micro insurance into areas surrounding the product, especially with life insurance or investment. We can expect the rules and provisions to become less stringent to ease access for those making claims.
Considering that non-life insurance makes up the bulk of business, what is the opportunity for life insurance segment growth?
Over the years, we have seen life insurance grow, and a number of life insurance companies are on the rise. Through insurance education, more people are developing an appreciation of this segment. Many of the issues regarding life insurance have something to do with cultural backgrounds, and so there is a need to start there and break down some preconceived ideas. Slowly people are beginning to understand the value of this type of insurance.
What role does takaful insurance play in the PIA?
We have taken takaful on as a new product for the market. In terms of principles, it is like any traditional insurance in terms of payments. The real interest comes from the Islamic community; that said; non-Muslims have participated as well. PIA's aim to is capture what is happening in the economy. We need to enhance financial inclusion, which will give us more options to offer those seeking insurance.