Tanzania Insurance Sector Report

tanznia-insurance-sector-report

The Tanzania insurance sector is growing steadily, with 30 insurance companies and 112 insurance brokers currently active in the market (2014 TIRA data).

The insurance penetration, i.e. the contribution of insurance to National Gross Domestic Product remains very limited, paving the way for plenty of room for further growth.

As summarized by Stephen Okundi, CEO of Real Insurance Tanzania, an extension of Real Insurance Kenya: “There has been a lot of improvements compared to when the Tanzanian insurance market was liberalized.

Indeed during the year under review, 2014, the Tanzania insurance industry continued to play its strategic role within the Tanzanian economy by providing the national underwriting capacity and contributing towards the mobilization of financial resources for the sustainable economic development of the country.The number of players has increased and there has been increased trust from the general public on the ability of insurance companies to honour their promise. The sector is still in the growth stage.”

The Tanzania insurance industry total premiums reached TZS 554.4 billion in 2014, increasing by 17.0% from TZS 474.1 billion in 2013, and the TIRA estimates that the Tanzania insurance sector should have grown by 18.0% in 2014 reaching approximately TZS 559.4 billion.

Tanzania insurance penetration (premiums as a percentage of GDP) remained at 0.7% in 2014 as recorded in 2013.

The Tanzania insurance premium per capita (insurance density) grew by 13.9% to TZS 12,052 in 2014 from TZS 10,582 in 2013.

General insurance business showed a growth of 18.0% in gross premium income from TZS 417.7 billion during 2013 to TZS 494.0 billion during the year under review.

Meanwhile, life assurance business volume increased by 7.1% from TZS 56.4 billion during 2013 to TZS 60.4 billion in 2014.

Demand has been boosted both by Tanzanian people gaining awareness of the benefits of insurance coverage and by improving economic standards.

The growth of the insurance industry was broadly consistent with the growth of the national and the finance intermediation sector GDP during the year under review.

Tanzanian Insurance Sector Background

In 1996, the Insurance Act liberalised the market paving the way for private new entrants to the market, until then a monopoly was held by the government’s National Insurance Corporation.

These changes successfully attracted foreign and domestic investment to the Tanzanian insurance sector.

Most companies are partnerships between foreign companies and local investors, combining external sector knowledge and financing with local market expertise.

In 2009, a new Insurance Act established a general framework for companies operating in the insurance industry and created a regulatory and supervisory body, the Tanzania Insurance Regulatory Authority (TIRA).

Since its establishment, TIRA has pushed the industry towards a risk-based system, doing away with the old compliance-based system.

TIRA has also prepared and distributed insurance related publications aimed at improving insurance understanding and awareness among the population.

At the same time, TIRA has been working closely with insurance brokers to improve efficiency and professional standards in the industry.

As a result, Tanzanians are becoming more aware of the benefits of insuring against loss and the insurance sector is seizing an increasing percentage of the country’s growing economy.

Players in the Tanzanian Insurance Market

In 2014, the total number of insurance companies registered under the Insurance Act, (including one reinsurance company, Tan Re) was 30 compared to 29 in 2013.

Of the total registered companies in 2014, 23 represent privately owned insurance companies with at least one-third Tanzania citizen ownership, 2 companies are 100% state owned by the Governments of Tanzania and Zanzibar, and 5 companies are 100% owned by Tanzanians.

Summary of Insurance Companies Registration Position as of 31 December 2014
Business Registration Type 100% Local Mixed
Local & Foreign
Total at
end of 2014
Total at end of 2013
Long Term Assurance 1 2 3 3
General Insurance
(Marine & Non- Marine)
4 13 17 17
General Insurance
(Non-Marine Only)
1 3 4 3
General Insurance (Medical Only) 3 3 3
Both (Composite) 1 1 2 2
Reinsurance 1 1 1
Total 7 23 30 29

A total of 24 new brokers were registered during 2014, while 2 others were deregistered for failing to meet certain statutory provisions under the Insurance Act and its attendant Regulations.The total number of registered brokers in 2014 was 112 compared to 90 at the end of the previous year.

The number of registered insurance agents in 2014 was 471 compared to 301 as reported at the end of the previous year. The number of registered Loss Adjusters/Assessors in 2014 was 51.

Summary of Insurance Intermediaries Registration Position as of 31 Dec 2014

Type of Intermediary/ Service Providers
Total Reg. in 2014
Total Reg. in 2013
2014/2013 Incr./ (Decr.)
Insurance Agents
471
301
170
Insurance Brokers
112
90
22
Loss Adjusters/ Assessors
51
44
7
Total
634
435
199

The Tanzania Insurance Sector by Type of Insurance

The insurance market in Tanzania is split into two segments: general insurance and long-term assurance business.

General insurance is essentially property and casualty insurance and comprises lines such as accident, vehicles, liability and credit.

General is by far the largest market in Tanzania, with almost 90% of premiums.

Long-term assurance relates primarily to life insurance and other similar classes such as linked long-term business and permanent health insurance.

General Insurance business showed a growth of 18.0% in gross premium income from TZS 417.7 billion in 2013 to TZS 494.0 billion in 2014.

This was higher than the 15% growth between 2012 and 2013, but within the projected industry average growth rate of 18%.

TIRA attributes this increase to the continued observance of insurance principles by most players in the market including timely payment of genuine claims, compliance by the public and conducive business environment in the country due to the government’s efforts in creating wealth and thereby enabling people to acquire more disposable income with which they can purchase insurance covers.

The highest growth rate in general insurance business was recorded in the Avıatıon class of business which grew by 41% in 2014, followed by Motor (+35%), Other Genral (+25%), Health (+17%), and Engineering (+12%).

Accident and Marine classes decreased in premium volume by 2% and 3%, respectively.

General insurance companies recorded an underwriting loss of TZS 1.3 billion in 2014 compared to an underwriting loss of TZS 3.5 billion in 2013.

General insurance net income after tax amounted to TZS 22.5 billion in 2014, having increased by 51.3% compared to TZS 14.9 billion of 2013.

On a class-by-class basis, the Health class of business had the poorest underwriting result having incurred a loss of TZS 3.8 billion, followed by Fire (TZS 0.8 billion), Marine (TZS 0.77 billion), Aviation (TZS 0.6 billion), and Other General (TZS 0.3 billion).

Motor, Engineering and Oil & Gas classes of business recorded underwriting profits at TZS 2.2 billion, TZS 1.8 billion and TZS 0.95 billion respectively.

The expense ratio for the general insurance segment was 45%, representing a 21% increase from 38% in 2013.

Meanwhile, the companies earned an investment income of TZS 29.3 billion, 42% higher compared to the income of TZS 20.7 billion that was reportedly earned in the previous year.

This increase in investment income is mainly attributed to significant increases in realized and unrealized gains, foreign exchange gains, and other investment income.

Life Assurance the relatively small life assurance sector, which represents 10.4% of the industry income, continued to grow in 2014 – up 7.1% to TZS 60.4 billion from TZS 56.4 billion in 2013.

All 5 insurers, which transacted life assurance business in 2014, experienced an expansion of their business portfolio.

These were namely; African Life Assurance, Metropolitan Tanzania Life Assurance, Alliance Life Insurance, Jubilee Insurance, and National Insurance Corporation of Tanzania. “Other Life” class’ sales were an important channel for assurance companies and grew more than 120% in the year.

As explained to TanzaniaInvest by African Life Assurance CEO Julius Magabe, “85 % of our business is corporate business; this means that institutions are either buying life insurance for their employees or financial institutions covering their loan exposures.”

Mr. Magabe also believes that selling directly to individuals has a lot of future potential: “In terms of long term sustainability of the life insurance market, it is the retail market that drives the markets of this world. It is the premiums of individuals that sustain the insurance industry”.

Net operating income decreased from TZS 19.5 billion in 2013 to TZS 12.6 billion in 2014.

Policy holder benefits also decreased by 38.9% while claims ratio improved from 33.6% in 2013 to 45.8% for 2014.

On a class-by-class basis, “Other Life” reported the highest growth rate in life assurance business, which increased by 120.6% in 2014.

Life assurance companies earned an investment income of TZS 6.0 billion in 2012, representing a 37.2% decrease compared to income of TZS 9.6 billion earned in the previous year.

However, the companies recorded a total income (including net premium written, investment income, and other income) of TZS 44.6 billion, in 2012 being higher by 8.7% compared to income of TZS 41.1.

Tanzania Insurances Investment Performances Industry profitability increased despite a third year of worsening underwriting profits due to the strength and growth of investment returns.

At the end of 2011, total assets for the industry were TZS 450 billion, up 8.3% from 2011.

Insurer investment portfolios increased by 2.7% to TZS 299.5 billion.

These remained quite conservatively allocated – bank deposits took 47% and 12% was invested in government securities.

Almost 22% of Tanzanian insurer’s assets were invested in the booming real estate market.

Meanwhile, the stock market also benefitted from insurer investments, taking 6% of total portfolios.

The year ended with an increase in net worth of 18%, from TZS 107.9 billion in 2010 to TZS 126.9 billion.

Brokers Participation in Insurance Underwriting in Tanzania

Of the total TZS 406.5 billion in insurance premiums written during 2012 for both long-term and general insurance businesses, 60% was transacted through brokers (2011:62%).

During 2012, a total of 75 brokers conducted transactions in the general insurance business.

On a class-by-class basis, it is noted that the level of involvement of brokers in underwriting for the General insurance business differed from one class to another.

The greatest involvement of brokers is observed in Fire class of business whereby almost the entire premium volume was transacted through brokers.

This was followed by Other General (90%); Accident (85%); Fire (84%); Aviation (77%); Marine (71%); Motor (55%); Health (40%); and Engineering (38%).

During 2012, a total of 22 brokers conducted transactions in the long-term assurance business.

The total premium collected by brokers in respect to the 2012 long-term assurance business amounted to TZS 10.2 billion having decreased by 1% compared to TZS 10.4 billion in 2011.

On a class-by-class basis, the greatest involvement of brokers in conducting transactions for life assurance products is observed in the Group Life business whereby 36% of the entire premium volume was transacted through brokers.

This was followed by Other Life (5%); and Individual Life (1%).

According to Marianne Mugo, CEO of First Assurance Tanzania, it is easier for a new insurance company to market their products through brokers and agents: “Today 75% to 80% of our portfolio comes through brokers.”

“Over 3 years, we have seen substantial growth because brokers have become familiar with the services that we provide. When we started in 2010 we had less than 10 brokers selling our products; now we have about 40 and every year new brokers are coming and asking to do business with us.”

Challenges and Opportunities of the Tanzania Insurance Sector

Challenges 

Although experiencing sustained growth, education of consumers remains a major challenge for insurers in Tanzania.

“There is need to educate the market about health insurance and also to come up with relevant and affordable products. If this happens the coverage will increase”, says Kain Mbaya, former Country Director of AAR Insurance in Tanzania, the leading health insurer in the country.

To this end, AAR Insurance is creating new short-term health insurance products.

Likewise Niko Insurance Tanzania, a subsidiary of Niko Holdings of Malawi, revolutionized the market by launching a new insurance policy in 2013 called Homesure, a personal insurance policy that targets growing income earners in Tanzania who are investing in their homes.

“Instead of one buying several policies, all one needs is one policy that covers it all. You need one policy, one premium and one renewal date, instead of several premiums, policies and dates. Homesure offers both peace of mind and convenience to the insuring public,” explains Niko’s CEO Manasseh Kawoloka.

Another issue that characterizes the Tanzanian insurance demand is lack of trust from the general public.

However as industry standards have improved, consumers now have more faith in insurance companies.

“There has been increased trust from the general public on the ability of insurance companies to honor their promise,” believes Stephen Okundi, CEO of Real Insurance Tanzania.

To this regard, being a well-known insurer delivers business results. “A strong brand will enable me to be a household name hence growth and profitability will follow,” says Okundi.

Building a trusted brand in insurance takes time, cautions Maryanne Mugo, CEO of First Assurance Tanzania. “It takes time for consumers to gain confidence with a new insurance company.”

In addition, relationships and service are key to success. “You need to know the people and have confidence that the company you are insuring with will respond to you if you are faced with a claim,” adds Mugo.

Another challenge according to TIRA is that experienced and skilled management and regulatory staff are difficult to acquire.

The regulator is responding by working to create new training and education facilities in Tanzania to support the industry. Some companies, such as AAR, encourage staff to spot and report opportunities for process improvement and innovation.

The firm also rewards top employees as part of a commitment to operational excellence. However much can be done to improve the market.

As Mbaya of AAR Insurance in Tanzania explains, “The greatest challenges are that, unlike in other countries (e.g. South Africa), Tanzania does not have a Health Funders Board (HFB) representing insurers, the regulator, and health professionals and hospitals.”

This drives up health insurance provision costs. “The cost of delivery of health services in Tanzania is high and, as a result, the cost of insurance goes up each year and this is not sustainable,” says Mbaya.

Mr. Mbaya believes that a more regulated market would benefit patients and insurers. “A board would regulate the activities of the market.

While the domestic economic situation is positive, sometimes the international context can create challenges for insurers. A continued weakening of the Tanzanian Shilling against strong currencies has created challenges for insurers’ paid up capital this year.

Solvency challenges underscore the need for insurers to have strong balance sheets, which international investors can often provide.

Mr. Magabe appreciates the support: “We are also lucky to be part of Sanlam Group, it is a large financial services group company originating from South Africa with operations across the globe; Africa, Europe, Asia and Australia. It is that kind of financial strength we bring into the Tanzanian market that gives consumers a lot of confidence in whom they are dealing with”.

Opportunities

The Tanzanian insurance market offers numerous opportunities for growth and international benchmarks in the African region suggest that there is much space to develop.

The overall economic outlook remains positive for the country with a GDP growth and a GDP per capita in 2013 of 7.0% and USD 33.23 billion respectively and an estimated GDP growth of 7.2% for 2014.

This means that middle class Tanzanians are increasingly able to afford insurance coverage.

Currently, awareness of insurance product benefits is growing but the market is still quite small.

Today, insurance penetration is less than 1% in Tanzania. “In Kenya [penetration] is about 3% and South Africa it is about 15%. So there is still room for insurance companies to reach more and more Tanzanians”, says Marianne Mugo of First Assurance Tanzania.

Furthermore, “The market is only saturated in the major urban areas while the rural areas including regions are not reached by insurance services,” adds Stephen Okundi CEO of Real Insurance Tanzania.

As the regulatory and supervisory body, the TIRA is working to increase awareness, particularly for life and property insurance.

The consistent growth of demand for insurance demonstrates a growing appetite for personal and business risk management.

Additionally, the government may provide a significant opportunity in the property insurance sector by adopting a policy for the insurance of its many properties.

A new distribution channel is also under review. Bank assurance is currently not regulated in the country and is the subject of a collaboration between the Bank of Tanzania and the TIRA to open the channel for insurance products. Insurers are supportive of the move.

As Stephen Okundi, CEO of Real Insurance Tanzania says, “This is a good idea as they have the customer base. They will still need us as their Principal hence increased business [will flow to insurers].”

Julius Magabe, CEO of African Life Assurance, believes that there is a lot of opportunity in the assurance sector: “There is a lot of room for other players to come into this market. There is enormous amount of business potential. The retail space, for instance, is a green field I would say. I do not really bother myself with competing for my competitors’ business, as there is a lot of new business potential out there. So the potential is immense.”

Magabe added, “In South Africa if you go into any major town there is an insurance office for insurance but in Tanzania you will only find such offices in major towns and cities such as Mwanza, Mbeya or Dar es Salaam.

But Tanzania is a very big country compared to other East African countries, so because of the widespread area of Tanzania and the cost of opening a branch, most insurance companies have opted to just be at the head office in Dar es Salaam. A few have opened branches, but there is a lot of potential in rural areas.

The Tanzanian Government has been promoting agri-business, so there are a lot of opportunities in this field, as there are very few, if any, Tanzanian insurance companies doing agricultural insurance.”

Okundi of Real Insurance agrees that opportunities are particularly present in “agriculture, life, medical and domestic insurance, micro-insurance products. There is a lot of potential for insurance products placement in in the rural parts of Tanzania.”

Additionally, Magabe believes that Tanzania provides a compelling business case for international capital: “The opportunities in Tanzania and the political stability of the nation would whet the appetite of any foreign investor looking for an ideal investment destination. Insurance, banking, services, manufacturing, mining…there is enormous amount of untapped business opportunity in Tanzania.”

To sum it up all, as explains Kain Mbaya, Country Director of AAR Insurance Tanzania: “Anywhere in the world where there is an emerging middle class, insurance has thrived and we, therefore, need to position ourselves to be able to respond to the market with products that are relevant to them.”

With an increased awareness from Tanzanian consumers in combination with a growing middle class and a strengthening GDP, the Tanzania insurance industry is positioned to play a strategic role in the growth of the Tanzanian economy in a developing sector that is ripe for investment.

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