TanzaniaInvest interviewed CEO of African Life Assurance; Julius Magabe and he shared insightful details on Tanzania’s first and largest Life Insurer and the overall growth of life insurance in Tanzania.
TanzaniaInvest.com : Tanzania insurance sector was liberalized in 1997 and since then the country has experienced a flock of foreign insurance companies then local ones took off, but when we actually look at life insurance only five insurance companies out of twenty-six operating in Tanzania, offer life insurance. Why is that?
Julius Magabe : Well, I suppose when the market was liberalized in 1997 the easy market to penetrate at that point was the general insurance, motor and property insurance. People had more knowledge on those insurances. From that time even the intermediaries who were supporting the industry, like brokers and agents, had a greater appetite to sell general insurance because life insurance takes a greater effort for you to sell. It took time for the market to grow awareness and knowledge of life insurance. So that is why you will see only five life insurance companies at the moment. When we entered the market in 2005, the life insurance market was not very active.
We were the first specialist life insurance to enter the market. The key challenge we faced even with intermediaries is that they did not have the appetite to sell life insurance. It takes a long time to pursue potential clients and customers. People want to see the benefits of insurance while they are still alive. They forget that all their hardwork is meant to improve the standard of living for their loved ones and no one wants to leave their loved ones behind with a worse off life.
Life insurance provide provides the necessary intervention to guarantee that kind of financial wellbeing to an individual or family. So it took a while, but from the time we entered the market we have been very aggressive in terms of growing the industry, developing awareness and expanding the business. So to answer your question, the reason why Tanzania has only five life insurance companies is because general insurance was seen at the time as the low hanging fruit thus the easier market to penetrate.
Corporates had a better understanding of general insurance and so forth and that is why there has been more growth on the general insurance side than on the life insurance side. Nonetheless, the outlook for life insurance and its growth now is quite good.
TI : What is the profile of the person who has life insurance? Who buys life insurance in Tanzania today?
JM : It is mainly Corporates at the moment, 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. So predominantly you will find it is the corporations who will provide insurance to the employees.
Individuals taking life insurance is still very slow in terms of penetration. There is improvement, but at a slow pace compared to corporate penetration. Corporate business is what rules the life insurance industry in Tanzania at the moment but there is enormous amount of potential on the retail side if we are able to deal with the penetration challenges.{xtypo_quote_right}Corporate business is what rules the life insurance industry in Tanzania at the moment but there is enormous amount of potential on the retail side if we are able to deal with the penetration challenges.{/xtypo_quote_right}
TI : What makes more business sense to you? Corporate or Retail business?
JM : In the interim the corporate market does offer sizeable amount of premiums in terms of business. 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.
The large corporations give you billions of shillings, but tomorrow if you have stiff competition you lose that huge premium from just a few accounts. So if I had to change the status quo, I would want 85% of our business to be individuals and 15% corporations, rather than the other way around.
TI : When it comes to non-life insurance, the insurance broker have about 80% market share. What is the situation for life insurance?
JM : For us, African Life Assurance, about 80% of our business is direct and 20% is through intermediaries. We have a 50% market share and we are the leading life insurer in Tanzania. We were the first specialist life insurer in the market. We have only focused on life insurance since establishment while our competitors focused on both general and life, with life insurance being a small operation of their composite by then.
There was no doubt from the time we entered the market that there was lot of potential, but as I mentioned earlier, intermediaries did not have the appetite to sell Life Insurance and it therefore There was a lot of potential. It took a lot of effort penetrate the market both on the corporate and retails space. But I would say that things were a blessing in disguise for us,{xtypo_quote_left}There was no doubt from the time we entered the market that there was lot of potential…I would say that things were a blessing in disguise for us{/xtypo_quote_left} as we had to be very aggressive to make sales knowing that the intermediary market was not active on the life insurance side.
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.
TI : There are five life insurance companies in Tanzania. Do you see room for growth for other player to enter the market?
JM : 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.
There is a population of 45 million people in Tanzania, 50% of that is economically active in some form. In this market we are not even insuring half a million people who buy insurance individually. There are 12 million people as potential life policy holders. So it there is an immense potential.
TI : Your country is enjoying increasing attention from the international investment community. Today, Africa is the place to invest. In your own words, what is Tanzania about?
JM : I would say Tanzania is among the few places you can say is the land of opportunity. Leaving the insurance sector aside there are still other sectors that offer immense opportunity in Tanzania. I think that will continue for a foreseeable future. There is great opportunity in every sector of this economy.{xtypo_quote_right} I would say Tanzania is among the few places you can say is the land of opportunity…There is great opportunity in every sector of this economy.{/xtypo_quote_right}
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.
