Nov 27 , 2021

The executives of Bunna Insurance S.C. are basking in the instant success of a life policy as the firm recorded 8.5 million Br in gross premiums in the two months since it began offering the insurance product. The figure is nearly three times what the company's management had forecast for the entire fiscal year and far outstrips previous industry records.

Bunna Insurance, incorporated in 2013, was engaged solely in selling non-life insurance policies before an application to involve in the long-term insurance business was approved by the National Bank of Ethiopia (NBE) in September this year. The firm began offering ordinary, group, endowment and mortgage life insurance the following month. A feasibility study was conducted before launching the product. Bunna Insurance's executives did not expect more than three million Birr in premiums in the first year, according to Endalkachew Tesfaye, claims manager.

"The study showed the business was nascent," Endalkachew told Fortune. "But there is an untapped market opportunity."

No private insurance company had previously generated more than 2.3 million Br from the long-term insurance business in the first year of operation. Only 10 of the 18 insurance companies offer long-term insurance policies.

Ethio Life Insurance was the only firm exclusively engaged in the long-term insurance business since its incorporation in 2008. However, a lack of demand pushed the insurer to broaden its sphere by including non-life insurance products in its portfolio four years later. It was compelled to change its name to Ethio Life & General Insurance.

Non-life insurance has long dominated the industry. However, there has been a shift in recent years, with long-term policies accounting for seven percent of industry gross written premiums, up from five percent two years ago. Despite years of single-digit growth, the premiums generated by the long-term insurance business increased by 13pc to 579 million in 2019/20. The figure jumped 67pc last year, almost reaching one billion Birr.

Private firms are leading the pack, with Awash Insurance registering 325.5 million Br in life premiums last year, a growth of 173pc. United Insurance saw premiums for life insurance grow to 71.3 million Br over the same period, jumping by 56pc, and Nile Insurance recorded a 20pc increase to 57.9 million Br.

Industry insiders see room to grow the life insurance line of business further.

Ebsa Mohammed, an insurance expert and manager at Alpha Consultancy, praises Bunna's achievement. He believes the industry can do more with life insurance, coming out of a somewhat "disappointing" backdrop over the past 20 years. Ebsa attributed the growth in recent years mainly to a rise in group life insurance policy sales. It is conventional for most international organisations and NGOs based in Ethiopia to buy group life insurance policies for their employees, according to Ebsa.

Ebsa's observation is reflected in the performance of Bunna Insurance, where group life insurance policies are a key element of the firm's success.

Others in the industry see different reasons for the sudden rise in the demand for life insurance products. An insurance broker working for Abat Insurance Brokers & Consultants observed a shift in culture and public consciousness change.

“An increasing number of people are becoming more conscious about their future due to the COVID-19 pandemic," the broker told Fortune.

Close to 56pc of the premiums earned by Awash in the long-term business came from COVID-19 travel insurance policies, which covers the cost of medical expenses brought on by the pandemic while travelling. In their annual report released recently, executives of Nile Insurance have outlined the importance COVID-19 related products have on the growing life insurance premiums.

This pushes others in the industry to diversify their portfolios.

Tsehay Insurance, incorporated in 2012, has submitted a proposal to engage in the long-term insurance business, awaiting approval from regulators at the NBE.

"We`ve submitted the required documents two weeks ago," Kassa Lisanework, CEO of Tsehay Insurance, told Fortune.

Bunna Insurance, operating with a paid-up capital of 173.5 million Br, has executives keen to capitalise on the firm`s newfound success. The company has thus far been conducting life insurance business without agents, but it is working to change that, according to Endalkachew.

"We're in the process of recruiting," he disclosed. Bunna Insurance netted 34.6 million Br in profits last year.

PUBLISHED ON Nov 27,2021 [ VOL 22 , NO 1126]

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