By MAIMBOLWA MULIKELELA-
THE insurance industry plays an important role as a provider of short and long-term financial protection.
Every person at any level of society needs to benefit from insurance solutions of one kind or another.
According to the 2020 Finscope Survey, the majority of people who do not use insurance either do not understand how it works or they think it is too expensive or feel they do not need it.
It is no secret that some sections of the society have a negative view towards financial services in general and insurance in particular.
Undoubtedly, the negative perceptions about the insurance industry and several myths surrounding the industry have contributed to the low uptake of insurance products which currently is at five per cent.
It is for this reason that when misfortunes strike, people resort to costly risk management mechanisms such as unregulated loans, commonly known as “Kaloba” and yet there are insurance products that can cover the financial cost losses arising from fires, burglary, rain and other misfortunes.
But if the country is to experience sustained economic prosperity, this scenario needs to change.
These observations were made by the players in the insurance industry and policy makers in Lusaka at the just ended annual insurance conference organised by the Insurers Association of Zambia (IAZ) where they gathered from November 18 -19 2021 to find solutions on how to create a positive image about the industry in the country.
This year’s annual conference was celebrated under the theme “Enhancing Public Perception of Insurance to Support Economic Growth.”
IAZ Executive Director, Nkaka Mwashika said the negative perception about the insurance industry needs to change urgently.
Dr Mwashika said there was need to also dispel several myths about insurance if people’s perception was going to change.
“Insurance is essential for individuals and businesses to stand a test of time,” he said.
He said some players needed to rethink how they dealt with comments on various platforms such as radio, newspaper and social media
Dr Mwashika noted that the power of an economy was not only in the Gross Domestic Product (GDP) but also in the ability of individuals in society to recover when they experience various financial losses.
He said without financial protection, people would continue to depend on the benevolence of society when calamity strikes.
Insurance provides a more sustainable and predictable way for citizens to deal with financial loss and save up for future needs.
That is why insurance, pensions and savings are vital for the long-term wellbeing of the society.
Finance and National Planning Minister Situmbeko Musokotwane said the insurance industry played an important role in terms of educating the public and enhancing public perception.
Dr Musokotwane said a positive perception on insurance could only be formed when all players in the industry were aware of the consumers’ expectations from all providers.
He observed that timely settlement of claims would lead to a satisfied client who in turn would serve as ambassadors of the industry.
“It is not possible to enhance public perception without a robust system for responding to complaints and resolving grievances. Therefore, it is vital that the whole industry perfects and effectively implements the process of handling customer complaints,” Dr Musokotwane said.
He said the Government was committed to ensuring that the insurance industry attains its optimal growth to contribute significantly to the overall economic growth trajectory.
Currently, the insurance sector contributes only about three per cent to Zambia’s GDP growth which is way below what is obtaining in the region.
It is for this reason that the Government is undertaking some key measures to make sure that the industry thrives.
Some of the measures being undertaken by Government include but not limited to ensuring that the Pensions and Insurance Authority (PIA), the regulatory authority, is strengthened.
This will be done by fully implementing the insurance Act No. 38 of
2021, supporting the introduction and rollout of more micro insurance products which are designed to be affordable by Zambians.
Other measures are encouraging the financial sector players to take advantage of the opportunities that will arise from the African Continental Free Trade Area (AfCFTA) as aggregate market across the region has the potential to reduce the cost of various services and among others.
PIA acting registrar Kabisa Ngwira said the Authority was looking forward to the operationalisation of the Insurance Act No. 38 of 2021.
The Act is expected to lead to expanded landscape of insurance services through the introduction of microinsurance business, enhancement of treating customers fairly framework, strengthened risk based capital adequacy framework and the enforcement provisions for the Authority.
Ms Ngwira said however, that the industry still faced challenges particularly with respect to claims settlement.
This is primarily due to poor financial soundness of some companies.
She said failure to settle claims promptly, therefore, affects the way the policyholder views the insurer and the entire industry.
As it is well known that insurance business is premised on a promise and the efficiency in fulfilling, this promise has a telling effect.
The policyholders pay premiums to insurance companies trusting that they will make good on their promise in an event that an insured risk crystallizes.
Ms Ngwira emphasised that trust was the key word in the insurance business as many people could not reliably assess whether an insurer would be able to fulfill its financial promise if the need ever arises.
“The public’s perception of our industry can only begin to change if we honour claims expeditiously. Failure to do so will render us irrelevant in the financial space,” she said.
Studies have shown that growth of an insurance industry has often been from long term or life sector.
The landscape in Zambia is different and thus if the country is to make a significant contribution to the economy, this is the sector that that need to grow.
Ms Ngwira said it was the Authority’s expectation that the industry could innovate and develop market researched products that ought to be efficiently delivered to customers.
Meanwhile, IAZ president, Christabel Banda, said public perception of insurance was among the focal points of the conference.
Ms Banda believed that the conference participants had done justice to the theme of dealing with the negative perceptions about insurance by some members of the public.
She expressed confidence that Government would take into consideration key issues which were discussed at the conference.
“We believe we did justice to the theme of dealing with the public perception. We got candid feedback and what was shared at the conference should help move forward. We will take up matters which came up at the conference. We expect some friendly outcomes from the deliberations we have had in the conference and we wish you will take them up into consideration as you review the budget [2022 national budget]. We hope that once you get back to the Ministry, you will take up our message,” Ms Banda said.
After all the thorough deliberations and formulating proposals for a stronger insurance industry, the future of the industry is brighter going forward.
Once the resolutions are implemented, the issues of best practices and industry reputation will be dealt with in the near future.
By and large, the insurance industry has the potential to contribute more to the growth of the economy in the years to come.