TanzaniaInvest had the pleasure of interviewing Stephen Lokonyo, Chief Executive Officer of Britam Tanzania, part of Britam (NSE: BRIT), a diversified financial services group with operations in Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi, offering insurance, asset management, banking, and property.
Lokonyo talks about the Tanzanian insurance sector, its outlook and the opportunities available.
TanzaniaInvest (TI): Tanzania is among the 20 fastest economies in the world and yet the insurance penetration ratio is less than 1%. In your opinion, what is the reason for such low penetration?
Stephen Lokonyo (SL): The reasons for the low insurance penetration in Tanzania are varied, ranging from economic, social to political.
Poverty levels are still high in the country making insurance and other financial services unaffordable.
Insurance awareness is also low, combined with general low financial literacy.
Socially, most communities had their own mechanisms for dealing with misfortunes both at family and at community level. These are forms of social insurance that are still very strong.
TI: The Tanzanian insurance market grew by 17% in gross premium returns in 2015, reaching more than TZS650b. How do you see the future outlook for the insurance market?
SL: Tanzania has experienced consistent economic growth over the last 10 years and the forecast is that this growth will continue.
This has led to general improvement in the standards of living and purchasing power.
The future outlook is very bright for the insurance industry. The growth for 2016 may not be as high as 2015 but the economic fundamentals are right and we foresee continued growth.
With the government’s plans to launch major infrastructure projects, focus on industrialization and the continued fight against corruption, the future can only get better.
TI: Which segment of the insurance industry hold the greatest potential for growth?
SL: We see tremendous growth opportunities in the middle class, SME sector and in manufacturing and processing driven by the new government’s focus on industrialization.
Tanzania is greatly endowed with natural resources and the exploitation of oil and gas will transform the economy and insurance premiums generated from this sector will be substantial.
The insurance sector must, therefore, prepare itself well to exploit this potential.
Currently, we have partnered with A rated securities from around the world to provide bespoke insurance solutions for the oil and gas sector.
We believe that every risk is unique and coverage must be suited to the risks presented.
Agriculture is another major driver of the Tanzanian economy as it currently contributes over 25% of the GDP.
The agricultural sector has not received enough interest from the insurance sector mainly due to lack of suitable and affordable products and the subsistence nature of the current practices.
Lately, though there has been a lot of activities aimed at designing suitable products and deepening insurance awareness in order to harness this potential. Britam has been and will continue to be part of these industry initiatives.
TI: In 2014, Real Insurance Company Tanzania became part of Britam, a Kenyan diversified financial services group in Kenya. What are the benefits of this takeover and what has been the market’s feedback?
SL: With the acquisition of Real Insurance in 2014 Britam became a pan-African company operating in 7 countries in East and Southern Africa.
This has enabled Britam Tanzania to tap into synergies in IT, actuarial and legal expertise not previously available.
The expansive regional reach that we now have across the 7 countries has also put in us in a very good position to serve our clients better, particularly those with regional operations.
With group’s assets in excess of USD800m in 2015, Britam Tanzania is part of strong financial services group.
The launch of the Britam brand in Tanzania has been received very well by our customers, partners, and potential clients.
The Britam brand has brought with it financial strength and experience gained over a period of 50 years.
Our new identity is a renewal of our commitment to values of Integrity respect, innovation, and customer focus.
TI: Britam has branches Dar es Salaam, Arusha, Dodoma, Mwanza, Mbeya, and Mtwara. What are your plans for further expansion of Britam’s branch network in Tanzania? What are your ambitions in term of market share, what are your competitive advantages and the challenges ahead?
SL: For now our focus is to explore the distribution of our products using alternative channels, hence opening of new offices is not a priority.
Britam’s ambition is to be a market leader in service and profitability.
Key challenges include adherence to ethical standards in the industry, high poverty levels and the low financial literacy in the country.
However, we have qualified staff, the IT infrastructure and the financial strength to support our ambitions.