Tanzania Insurance Sector Outlook And Investment Opportunities
Tanzania’s economy and population are expanding rapidly, and so is its insurance industry.
The Bank of Tanzania (BoT) estimates Tanzania’s GDP growth rate to be 4.7% in 2022, and the African Development Bank (AfDB) projects a growth rate for 2023 of 5.6%.
Tanzania’s population has increased by 37% in the last 10 years to reach 62.7 million in 2022 and is expected to grow rapidly, between 2% and 3% per year over the 2022-2050 period. Its working class is graduating to medium-level income earners, therefore, the disposable income for services like insurance is high and increasing.
The most populated city Dar es Salaam is considered one of the fastest-growing cities in Africa and is steadily accumulating interest from investors hoping to offer insurance and capital to the city’s urbanizing population.
Furthermore, Africa’s and insurance industries are standing at a significant critical development juncture in the wake of the African Continental Free Trade Area (AfCFTA), which Tanzania ratified in 2021.
Tanzania’s Prime Minister, Hon. Kassim Majaliwa stressed that AfCFTA offers massive opportunities for the insurance business in an array of economic sectors including agriculture, minerals, oil and natural gas, and urged African insurance companies to cooperate and develop strategies to cover all risks on the continent.
He disclosed, in November 2022, that “the Ministry of Finance in collaboration with TIRA is preparing a guide for agriculture, livestock, and fisheries insurance to ensure that this large group gets served, especially given the challenges of climate change .”
“The Ministry of Finance in collaboration with TIRA is preparing a guide for agriculture, livestock, and fisheries insurance”Kassim Majaliwa, Prime Minister of Tanzania
Within this framework, the Tanzanian government, via its Financial Sector Development Master Plan 2020/21 – 2029/30, has set ambitious goals for the next few years.
By 2030, it aims for 90% of the population to be covered by health insurance, for 50% of the adult population to have access to and use insurance products, for 20% of adults to have life savings products, and 10% of retirement plan beneficiaries to use annuity products. All in all, it is expected that insurance penetration will reach 5% by the end of this period.
The government has it very clear that it cannot alone achieve the goal of expanding insurance coverage to this degree without support from the private sector and technological innovation.
The Permanent Secretary (PS) of the Ministry of Finance and Planning Emmanuel Tutuba put it clearly: “This transformation can only happen if the insurance industry pivots itself on innovation and synergy. The first part is digitalization. The second part is for the players, re/insurers, insurance brokers/agents, bank assures, and all the players across the insurance value chain to work in synergy so as to achieve the economies of scale”.
“Transformation can only happen if the insurance industry pivots itself on innovation and synergy. The first part is digitalization. The second part is for the players across the insurance value chain to work in synergy so as to achieve the economies of scale”.Emmanuel Tutuba, Permanent Secretary, Ministry of Finance and Planning
To stimulate and develop the market, TIRA has recently established, in association with the Association of Tanzania Insurers (ATI), the Oil & Gas Consortium to complement the ongoing mega oil and gas exploration projects in Tanzania. The consortium is expected to underwrite the oil and gas business in the country for the account and benefit of its members, increase the retention capacity of the Tanzanian market, and develop local technical skills in underwriting the said insurance business.
Tanzania is also on the verge of achieving universal health coverage, led by President Samia Suluhu Hassan, who has been advocating for a healthcare insurance scheme that ensures all Tanzanian citizens and residents have health insurance, regardless of employment status.
The penetration of health insurance schemes is still low in the country, with only 32% of Tanzanians covered by health insurance, mostly served by the National Health Insurance Fund (NHIF), a Government entity under the Ministry of Health (MOH) that provides compulsory enrollment arrangement to public servants. Meanwhile, just 1% of health coverage is provided by private health insurance schemes.
On November 1, 2023, the Tanzanian National Assembly passed the long-awaited Universal Health Care Bill following extensive consultations to address initial uncertainties about how the scheme would be financed.
The new law will establish an equity fund to help subsidize health insurance premiums for low-income citizens and cover treatments for chronic diseases. This fund will be financed by levies on items such as carbonated drinks, alcoholic beverages, and electronic transactions.
“We are aware of the challenges and weaknesses of our health insurance fund. Therefore, we have taken the necessary measures to ensure that the institution that will be responsible for the universal health coverage scheme will be stable and guided by new legislation, regulations, and policies through which Tanzanians will be able to access healthcare any time they need it,” President Samis said.
“Tanzanians will be able to access healthcare any time they need it.”Samia Suluhu Hassan, President of Tanzania
TIRA has also been introducing new mandatory covers, engaging with insurance companies and intermediaries to deploy awareness programs, and developing new products that are in line with the needs of the people. In 2022, it issued new guidelines on the Takaful Operational Guidelines (Islamic Insurance), untapping the potential for Sharia-compliant products in Tanzania.
TIRA also issued a guideline for actuarial functions in 2018 to force all insurance companies in Tanzania to establish an actuarial department. Many local insurance companies rely on foreign experts and do not see the importance of having a local actuarial department, but the new rules force them to use local independent experts. The Association of Tanzanian Insurers (ATI) appealed to the regulator to get an extension to establish a workable actuarial department and TIRA agreed, giving up at the end of December 2021 for insurance companies to appoint a statutory actuary, independent from the company, to look into the affairs of the firm. But local expertise is still not entirely there, as the ATI Chairman Khamis Suleiman explains: “We don’t have a local certified independent actuarial specialist in Tanzania, and the few experts are already employed by various companies.”
The results of these initiatives to transform and expand the insurance market are expected in 2023. “In 2023, we expect to see many positive results such as discipline in the market, increased growth, and the number of insurance users will increase due to various platforms that are legally allowed to sell insurance products,” said TIRA’s Commissioner General Dr. Baghayo Saqware.
“In 2023, we expect to see the number of insurance users to increase due to various platforms that are legally allowed to sell insurance products.”Baghayo Saqware, Commissioner General, Tanzania Insurance Regulatory Authority
In the meantime, the preliminary results of some companies for 2022 clearly highlight growth trends, supported by the continued economic and population growth, awareness and sensibilization campaign, and the introduction of tailor-made insurance products.
Sanlam, among the largest insurers in the country, posted strong performances in 2022. “We experienced a growth of 25% in motor insurance. Microinsurance and smaller insurance premium coverages are being very profitable. Here the distribution channels make the growth, namely banks, agents, and digital platforms,” explains its CEO Khamis Suleiman.
“Microinsurance and smaller insurance premium coverages are being very profitable. Here the distribution channels make the growth, namely banks, agents, and digital platforms.”Khamis Suleiman, CEO, Sanlam
Mo Assurance, which is among the companies that had the highest levels of underwriting profits in 2021 (TZS 2.2 billion), indicates that its performances were also good in 2022. “Our top line has grown by 15%, and our profits have grown by 5%. Our biggest growth has been in the motor and marine line of business, which have been profitable,” says its CEO Gregory Fortes.
He also agrees that microinsurance is the way forward, i.e., cheaper products for the masses to afford.
As for motor insurance, for ICEA Lion General Insurance this is the product that grew the most in 2022. “The production for 2022 was TZS 18.7 Billion in comparison to 17.2 Billion in 2021. Also, domestic packages and contractors all risk have proven to be the most profitable products,” explains its head of marketing Davis Mwijage.
The company expect to grow its business by 33% in the next few years and expects the growth to come mostly from motor and domestic insurance, and plans to add more selling point as well as increase the use of intermediaries.
Life assurance is expected to grow strong, as shown by the exciting performances of Sanlam Life, Tanzania’s largest life insurer, in 2022. “Our revenues grew by +48% and our profits equally followed this trend. The growth was at the back of an improved operating environment post-Covid-19. Our Credit Life Insurance business line saw the highest growth driven largely by increased lending in the banking environment,” explains its CEO Julius Magabe.
“In 2022 our revenues grew by +48% and our profits equally followed this trend. Our Credit Life Insurance business line saw the highest growth driven largely by increased lending in the banking environment.”Julius Magabe, CEO, Sanlam Life
Clause 29 of Circular 55/2017 requires life assurance businesses to be locally placed by 2023. This is expected to be a boon for local reinsurance companies.
“However, from the very nature of insurance, not every risk can be 100% retained in-country; there will be risk exposures that even local reinsurers will have to seek retrocession support externally,” Magabe stresses, adding that “being the leading insurer in Tanzania and part of the largest Pan African Insurer – Sanlam, makes us well positioned to offer the solutions required by any investor coming into Tanzania.”
Magabe also advocates for other classes of insurance business to be made compulsory like household insurance and group life insurance for employees. “Loss of lives and shelter have a significant negative economic impact on communities, and we need to start somewhere to grow a culture of ownership in financial protection,” he explains.
In this regard, insurance brokers and agents play a key role. They ensure competition among underwriters in the market, push their innovation efforts, undergo market intelligence and forecast environmental changes, and introduce tailor-made innovative insurance products together with insurance companies.
A concrete example of that is Howden Puri, a broker that in March 2022 launched, with the backing of Sanlam, Hifadhi Biashara, a new microinsurance policy for small business owners. In addition, the policy is managed through a mobile platform, for easy and cost-efficient access for the insurer.
New technologies and the digitization of distribution channels are critical to increasing insurance’s uptake.
“Spur in the uptake of insurance products can only happen by embracing digital and other non-conventional ways of distribution, using multiple channels such as MNOs, banks, fintechs, insurtechs, etc. to reach the end consumer. The regulator should offer an environment where innovation in this space is encouraged and supported. I believe that opening up the distribution channels for insurance will have a significant impact on driving penetration over the next 5 years and we have started seeing the signs already. A lot of innovation is happening in the non-conventional distribution space, delivering products to consumers who for many never thought they would ever consume insurance at such affordable rates,” says Magabe.
Newcomers and Consolidation
The number of insurance companies, and most recently reinsurance companies, has been growing progressively.
Dr. Saqware points out that “the number of insurance companies licensed in Tanzania seems big, but compared to the population, insurance is highly encouraged, particularly in medical insurance and reinsurance as we have few of them.”
However, some expect a degree of merger and acquisitions as there are many smaller companies, and the market requires quality, not quantity.
In fact, this may affect not just smaller players. In May 2022 German multinational financial services Allianz announced that it had completed the acquisition of a majority stake (51%) in the Jubilee General Insurance Company Tanzania, the largest in the country. The transaction is part of an agreement signed with Jubilee Holdings Limited (JHL) in September 2020, for Allianz to become the majority stakeholder in Jubilee Holdings’ short-term general insurance business (property and casualty) in East Africa, namely Kenya, Uganda, Tanzania, Burundi, and Mauritius.
Consequently, it is fair to expect both newcomers to enter the market and consolidation to take place in the years to come.
In addition to the obvious opportunities driven by its strong economic and population growth, Tanzania enjoys political stability and clear laws that protect investors.
In 2018, the Ministry of Industry, Trade, and Investment released The Blueprint For Regulatory Reforms To Improve The Business Environment to provide a guide for achieving the industrialization dream of creating, in the shortest period possible, the required business-enabling environment where the government and the private sector work hand in hand in realizing the dream. It seeks to put in place a framework that enables the review of the business-enabling environment (BEE) for an improved business climate in Tanzania.
Furthermore, the country is the only one to be part of the East African Community (EAC) and the Southern African Development Community (SADC). The business protocols in place make Tanzania a regional platform to enter and serve southern and eastern Africa.
All these factors combined provide room for expansion and investments.
According to Suleiman, insurance penetration can grow to 2.5% in five years, with star products being motor, and engineering to mitigate construction risks. “We collected TZS 911 billion in 2021 but our potential is twice as much,” he concludes.
Last Updated: 2nd November 2023