Tanzania approves microinsurance regulation

With around 7% of the country’s population having access to insurance, Tanzania is one of the insurance leaders in Africa. However, the country still has an enormous untapped potential to improve access to financial products. One of the key drivers of action to change the situation is the Tanzanian Insurance Regulatory Authority (TIRA), which has just approved new regulations for microinsurance.

Over 120 insurance experts participated in the International Microinsurance Conference – Learning Session Tanzania, which took place on 24 and 25 March 2014 in Dar es Salaam. Around 20 speakers from all over the world presented findings on topics important for the Tanzanian market. Case studies on how to develop microinsurance in Nigeria and Zambia, new developments in agricultural insurance and a discussion of the business case for microinsurance were key components of the agenda. The findings of these sessions were used to devise recommendations on how to support the market in Tanzania.

Important milestones reached
Since the 2012 International Microinsurance Conference, which took place in Tanzania, the country has developed a microinsurance strategy, which was presented by Julius Magabe, Chair of the Microinsurance Technical Working Group. The goal of the strategy is to ensure that “people in Tanzania have access to a wide range of appropriate insurance products addressing their risk management needs while protected by coherent consumer protection provisions and mechanisms”.

Most importantly, TIRA has approved a new microinsurance regulation, which was presented by the Insurance Commissioner, Mr. Israel Kamuzora, at the event. The new regulations include comprehensive educational requirements for agents (distributors of microinsurance) with the goal of providing customers with value. The rapid settlement of claims is one of the most challenging requirements in the regulation. Insurers will be required to settle microinsurance claims within three working days from the date of receipt of the claim. If more time is needed to settle a claim, the insurer will have to obtain an extension of not more than five days from the Commissioner. It remains to be seen how the industry will respond to these requirements, which are indeed consumer friendly but very challenging for the industry.

How can the development of microinsurance be accelerated?
With insurance penetration low in Tanzania, a great opportunity for the insurance industry lies ahead. “If telecom companies are doing business in the low income segment, why can’t insurers do the same?” was one the encouraging remarks by a representative from the insurance industry. Participants agreed that governments and regulators have an important role to play. Only in an enabling and reliable legal environment will microinsurance have the potential to develop and grow. “The new regulations from the Commissioner were of particular interest and we're registering as a microinsurance agent” said Laura Johnson from Kilimo Salama. The organisation is planning to extend its agricultural insurance scheme to Tanzania.

Among the various takeaways from the Learning Session Tanzania – produced by the participants in an “outlook session” – were the following: Microinsurance is an interesting market that plays an important role in the fight against poverty, but it needs long-term investment. Building upon existing infrastructure and exploiting existing distribution channels such as microfinance organisations may be a way to develop a successful business more rapidly. One of the key factors for success is the implementation of cost-effective distribution and servicing channels. The use of mobile phones in that context seems to be promising. In the long run, microinsurance requires a sustainable business model and products have to achieve scale. Providing products that are really needed and provide value is a first important step towards attracting microinsurance customers. However, timely and reliable payment of claims is a key factor in retaining them. Only if clients can rely on their insurance will the trust that is so important for the development of an insurance culture be built up.

In his closing remarks, Mr. Kamuzora thanked the organisers and stressed the importance of involving development partners in carrying the microinsurance agenda forward. “MFIs and other stakeholders should team up with insurance players in the market to help Tanzanians get access to financial services through micro-lending and microinsurance” said Kamuzora. Looking back at what Tanzania has achieved in the past 18 months, the Munich Re Foundation will certainly take up this responsibility and support the process whenever we are asked to do so.

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* http://www.microinsurancecentre.org/milk-project.html

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The International Microinsurance Conference – Learning Sessions complement the annual International Microinsurance Conference. They provide a platform to discuss key developments in a region or a country. The Learning Session Tanzania was jointly hosted by the Tanzanian Insurance Regulatory Authority (TIRA), the Financial Sector Deepening Trust (FSDT), ILO’s Microinsurance Innovation Facility and the Munich Re Foundation.