Today I wish to firstly pay tribute to Times of Zambia for creating space for this column which has been running for the fourth year now.
Secondly I want to salute the co-sponsors Professional Insurance Corporation Zambian PLC and Professional Life Assurance Ltd.
Much more the readers who have motivated me to keep going strong even when circumstances forbid by giving feedback and also those who have contributed articles whether directly or indirectly. Back to our topic
Each market has its own dynamics and today I will discuss some dynamics in the Zambian insurance market.
The subject is not exhaustive but I believe the points today will be a good starting point for someone interested in the subject.
To start with it is important to reiterate the fact that our market is a soft market in my opinion as discussed last week.
This means buyers have more bargaining power than suppliers.
They can bargain for higher limits for lower premiums a key factor that defines an insurance market. It is also easy for buyers to switch suppliers at minimal or no cost.
This creates a paradigm of tolerance or ‘softness’ from insurers i.e. they are willing to forgo higher premiums for the sake of retaining or acquiring clients but within acceptable limits set by the regulator.
Penetration levels are still as low as five percent with commercial lines largely eclipsing personal ones.
These statistics mean there is plenty of untapped potential in the market.
Further the general insurance or short term side is bigger than the life side with the former commanding over sixty percent of the written premiums as at 2014.
This is the opposite of most developed markets which have larger long term business.
However the growth rate has been relatively impressive averaging about twenty percent save for the past two or so years where the industry recorded historic low growth rate of less than ten percent.
The industry debt ratio is high in relative terms. This means customers are not good payers per se.
Generally speaking Zambians have a poor credit culture.
We like getting things on credit and struggle to pay back.
This is true from the smallest things such as consumables like groceries, food stuffs, and clothes etcetera. Some few years ago I used to buy clothes from Kamwala in Lusaka and resale in Ndola.
My experience was that people were quick to get the items but take ages to pay back.
In some cases I would end up spending more money trying to recover the debt than what was due to me.
At a corporate level I am an emerging farmer and among other things I grow vegetables and also keep some livestock such as pigs.
My experience is that when I supply to corporate customers I find it very tough to just collect money.
This experience is not very different from the insurance industry. Fellow practitioners will attest to the fact that while there are some very good payers there are some customers who have the capacity to pay premiums but due to some ‘reasons’ fail to pay their premiums.
My assumption is that this attitude emanates from the fact that many people place insurance is their third or fourth tier of needs.
Upon suffering a claim those with premiums outstanding usually want their premiums knocked off the claim; this is not a good practice in insurance.
Well meaning insurers find joy in settling claims with fully paid up premiums or on course with the payment terms.
On the same token there are few insurers who have swiping machines at points of sale.
Therefore customers are expected to carry cash or cheques when making payments for their insurance.
The next dynamic is on the control of the market.
The top three insurers control over fifty percent of the market while the top insurer controls about twenty four percent.
On the brokers side the two brokers largely control the brokered business market by about sixty percent.
This gives the two brokers much bargain power in the market.
All insurers need to work with these brokers and keep relationships sound because direct business especially commercial lines do not command a larger percent anymore.
Comments: webster@picz.co.zm or webster_tj@hotmail.com or on face book search for Insurance Talk-Zambia page or call/text 0977 857 055
[The Author is a Chartered Insurer with more than 10 years industry experience]