CEO of a leading short term Insurer Nicoz Diamond, Grace Muradzikwa warned insurers of the risks around underwriting risks they do not fully understand
Grace Murdzikwa was speaking to Commercial Risk Africa as part of a roundtable at the 44th African Insurance Organisation General Assembly in Kampala, where brokers, insurers and reinsurers met to promote inter-African co-operation in Insurance.
Grace Murdzikwa said that some of the pricing of premiums offered by insurers was too low and urged insurers to stop undercutting on premiums.
She also highlighted that undercutting was not a problem faced by local firms alone but a practice that foreign-owned insurers were engaged in to outbid local firms out of tenders, since local firms lack the capacity to drop their prices as low as the larger, foreign companies.
Participants in the round table warned that undercutting would not serve anyone, and that insurers would eventually be measured on the bottom-line results.
“When I looked at the underwriting profits for insurers back home, you can see the difficulties. And maybe we are selling insurance at a price which is not profitable,” Former Commissioner of Insurance for Tanzania Israel Kamuzora, warned.
Excessive competition within the insurance industry and especially the motor vehicle insurance has forced many insurers to undercut premiums to get a competitive edge.
The head of North and Sub Saharan Africa at Swiss Re, Lukas Mueller, stressed that the industry would much rather benefit from “growing the cake, instead of just competing against each other and increasing our risks”.
Insurers were encouraged to stop whining and start to invest in projects that will 20-30 years later benefit Africa.
“It is a 20- to 30-year game, investing in Africa,” said Raymond Snyders, CEO, Mutual & Federal.
“The return on investment can expand beyond the careers of the people who launched the project. We are here to facilitate business and make the risk of investment less. We hope to smooth out the risks and support investments across the continent,” he added.
The Insurance industry in Zimbabwe is sitting on pension assets worth close to $10 billion, which Government contends is a strategic source of funding that can be unlocked to finance various economic development projects.
The group agreed that increased insurance penetration rates are the only way that African insurers can grow their business and that it was important for them to use more innovative distribution channels and to be proactive in promoting insurance awareness.
The African Insurance Organisation (AIO), established in 1972, is a non-governmental organisation recognised by many African governments. Following the headquarters agreement the government of Cameroon signed with the organisation, the Permanent Secretariat of the AIO was set up in that country.
The AIO has 365 members: 351 of them from 47 countries in Africa and 16 associate members from 8 overseas countries.
Membership is open to the following:
- The Insurance Industry
- Regulatory/Supervisory authorities
- Insurance Training Centers
- National and Regional insurance associations