INSURING GROWTH

Zambia 2014 | FINANCE | INTERVIEW

TBY talks to George Silutongwe, Group Managing Director of ZSIC Limited on the players in the Zambian insurance market, improving insurance penetration levels, and agricultural diversification leading to growth.

George Silutongwe
BIOGRAPHY
Starting in 1980 George Silutongwe has worked his way through the ranks of the insurance industry holding various technical and executive positions, including being Managing Director of the Professional Insurance Corporation Zambia Ltd (PICZ), and of Professional Life Assurance Ltd (PLA). He was also Deputy Director of the Zambia Insurance Business College Trust. George holds an MBA from the University of Lincoln, UK. He is an Associate of the Chartered Insurance Institute (ACII), a Chartered Insurer, and a Fellow of the Insurance Institute of Zambia (FIIZA). Silutongwe holds certificates in corporate governance from the Commonwealth Association for Corporate Governance (CACG), and from the Global Forum for Corp Governance (IFC/GFCG).

How would you describe the competitive landscape of the insurance sector, and where is the Zambia State Insurance Corporation (ZSIC) within that landscape?

At the moment, we are about 23 insurance companies, 13 of which are non-life insurance companies and the rest are life insurance companies, and there are three reinsurance companies. Competition is quite stiff. ZSIC Life had been commanding the lead position until about last year, when it fell into second position in terms of gross income with a market share of about 24%-26%. ZSIC General is in the third position in terms of gross income, but we are working to see if we can regain our top positions, but the others are not sleeping, so it is a battle to compete.

How much of your strategy to regain the top position in non-life is centered on capturing existing markets, and how much depends on reaching out to insure the uninsured?

In Zambia insurance penetration is very low, at only about 4%-6% of the population. We are all targeting conventional insurance lines and the businesses like motor, fire, engineering, and so on, but we realize that we have to reach out to the unbanked and uninsured, such as micro, SMEs and the rural population. We are looking to see if we can improve on what we are calling micro insurance to provide practical products for low-income groups. But for ourselves, in our effort to gain market position we are trying to compete on all fronts, including the conventional market where we want to become better in terms of how fast we pay our claims and how fairly we pay those claims. At the moment, there are about four top insurance companies: ZSIC Group, Madison Group, Professional Insurance Group, and NICO Insurance.

How would you assess the current regulatory framework, and do you see any changes in the near future?

The regulator is quite effective and keeps improving every day. For example, there is a draft bill to raise statutory capital for insurance companies. The current required capital is too low, at slightly below an equivalent of $400,000, which is one reason we've seen so many entrants in the market. It is understood the new bill will raise the requirement to about $3 million. We believe that will strengthen the financial bases of the insurance companies and help them retain more risk.

It is predicted that the insurance sector will see a compound annual growth rate (CAGR) of 10% this year. Which lines are driving this growth?

Life is pretty much underpenetrated at the moment, so I think if our marketing and sensitization efforts are sustained; this will be one growth area. I am saying this too because we see more people with sustainable incomes coming into play. On the property and assets side, that too is a major area. For us at ZSIC, we are looking strongly at agribusiness. We have one of the largest agri-insurance units in the market. There is a lot of new equipment on the market and new techniques related to conservation farming and aimed at increasing yields. We've had quite big figures being insured by the commercial farmers on products like wheat—both rain fed and irrigated—as well as soya bean, and tobacco. Right now, there is a big input from the African Development Bank (ADB) in the region known as the “triangle of hope," which is between Zambia, Malawi, and Mozambique. In the northern region of Zambia, both the government and the community are trying to support a lot of cattle rearing, so they will be financing the establishment of dipping to prevent disease. People are also planning to grow coffee, and sugar in the wetlands of Zambia. So for me, next to mining, agriculture has the highest potential for our company as well as our country.