Radar | Oct 16,2021
March 20 , 2021
By Asseged G. Medhin ( Asseged G.Medhin, deputy CEO of Global Insurance Company. )
The insurance industry has been in flux, only recently seeing past the post-traumatic syndrome of traditionalism. The sector can tap into the ongoing transformation underway in the country at large as witnessed by reforms over the past two years. They count the insurance corporate governance directive, movable property right, micro-insurance directive, intellectual property rights, lease financing, stock market, and interest-free banking and insurance in their number.
The new era in economic governance is already inspiring a great deal of confidence and enthusiasm with several new entrant banks, including Hijra, ZamZam, Gadaa and, perhaps the biggest of them all, Amhara Bank.
A secondary market would best complement such a promising beginning. It offers significant returns on investment as the market provides both short-term and long-term investments where shares are easily traded.
The country with the second-biggest population on the continent remains behind in this sphere, nonetheless. All of our health coverage packages, insurance policies and retirement plans are input for a security market, which provides optimum returns for insurers and bankers. The current initiative of establishing a stock exchange platform should come to the top of the agenda of the National Bank of Ethiopia (NBE), insurers' associations, Ethiopian Re and insurance firms if they want to fish in more abundant waters.
There is a demand for this. Customers are tired of existing processes and want to get a new, dynamic and fresh outlook and a disruptive technology that eases their lives with proper insurance services. Evidently, this is hard for insurers to provide, underlining the challenges of the sector today.
We need to investigate the types of products most conducive to the economy and develop checkpoints in terms of coverage, benefits and marketability, as well as ensuring that products have the power to retain customers for relatively long periods.
The acquisition of knowledge in risk management and providing advisory input for those in emerging risks, not to mention the capacity of mapping out risk matrices, are the other challenges. Billions of dollars given in credit by this sector sustain the momentum of the economy, and yet the skilled capital in the sector – in terms of bankers, managers, auditors and accountants – is minute. Too little focus has been given to this circumstance. Hopefully, the trend is now in the arena of transformation. We do not have time – Prime Minister Abiy Ahmed’s (PhD) macroeconomic team and the Planning & Development Commission should target this as a central piece of their agenda for the financial sector.
The momentum of globalisation, despite recent hiccups, implies that Ethiopia will no longer survive closing its financial sector to foreign investors. We have only two options: either creating huge financial institutions such as Amhara Bank and merging giants in preparation for eventually opening up or subsisting in our current state of modest financialisation that lacks innovation.
There is also the issue of technology, a very crucial and ongoing challenge facing the insurance sector. Our technologies, especially data-driven processes in managing and serving growing customer demands, are under pressure.
However, the people in whom power is vested in leading this digital transformation are not enough to traverse this challenge. The government should supply the required currency and support tax incentives for those ready to digitise traditional services. In return, insurers ought to support this effort by providing the general public with affordable prices.
The capacity of insurers in terms of dynamism will increase and electrify stakeholders, not only clients. Technology adds value to the insurance core processes. It improves customer experience with digital interactions through digitising underwriting services and the management process of claims, the latter of which is nearly the entire cost of insurers.
Unless insurers and reinsurers constantly try to one-up their competitors to win over new customers and retain their current ones through technology, their competition will be solely through price cutting. It is becoming more and more evident that this is doable and up for the taking by regulators and the board members and CEOs running the industry.
PUBLISHED ON Mar 20,2021 [ VOL 21 , NO 1090]
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