Insurance Sector in East Africa – Part 2: Insurance Landscape in Tanzania

Photo Credits: Unsplash.com, by Matt Chasin

“You don’t buy life insurance because YOU are going to die, but because those you love are going to LIVE.” Legal and General America. Life insurance is a contract between an insurer and a policyholder, a life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies and the insured in return pays premiums during their lifetime. This article discusses the insurance landscape in Tanzania, by looking at the history/ background, trends, impact, state insurance in Tanzania and the role the insurance industry has played in Tanzania.

According to Francis T. Kamkwamba (2013), “Insurance business was introduced by the colonial capitalists who divided Africa as their overseas where they invested huge capital to run their businesses, rule and control their colonies.” After independence, Tanzania transformed its economic policy from private form to public ownership (ujamaa), and this led to the importance of insurance. In 1968, National Insurance Corporation (NIC) was provided the monopoly to deal with life and non-life insurance by the insurance Act. In 2009, Tanzania Insurance Regulatory Authority (TIRA) was formed by the insurance Act, the mission of the authority was “to develop, promote, and maintain an inclusive, efficient, fair, safe, and stable insurance market for the benefit and protection of policyholders.”

According to TIRA’s report, as of 2018, there were 31 businesses licensed to conduct insurance business, 25 general insurance businesses, 4 life insurance businesses, 1 operating both life and general insurance, and 1 reinsurance company. There are other 26 reinsurance companies and 39 reinsurance brokers. The list of some of the general insurance companies includes AAR Tanzania, Alliance Insurance Corporation Ltd, Britam Insurance Tanzania Ltd, Bumaco Insurance Company Ltd, GA Insurance Tanzania Ltd, Milembe Insurance, Mayfair Insurance Co. Tanzania, etc. While some life assurance companies include Alliance Life Assurance Limited, First Assurance, Jubilee Life Insurance Company Ltd, Metropolitan Tanzania Life Assurance Company Limited, etc. Some of the stakeholders are insurance brokers, insurance agents, and loss assessors, 83, 564, and 53 respectively in number.

Photo Credits: TIRA January- June 2018 Reports.

TIRA, January- June 2018 reports show that both general and life insurance businesses increased by 5.2% from TZS 342,822 million to TZS 360,642 million from 2017 June to 2018 June. Insurer’s net worth increased by 4.7% from TZS 279,224 million to TZS 292,450 in June 2017- June 2018. Total insurer’s investments increased by 6.5% from TZS 580.5 billion to TZS 618.3 billion. There was a 3.3% increase in insurance liabilities to TZS 606.1 billion from TZS 586.9 billion.

General insurance in Tanzania has recorded growth due to compliance by the public and new systems put in place by organizations like TIIP, TIRA, MIS through marketing and raising awareness. There is a 3.9% growth in gross premium income from TZS 301,425 million to TZS 313,141million in 2017-2018. Long-term assurance has also recorded growth of 14.75% from 2017-2018, TZS 41.4 million to TZS 47.5 million gross premium. According to TIRA 2015 annual report, the insurance sector will continue to have opportunities to grow due to a growing number of the middle class who are likely to create more demand for insurance products, steady national economic growth, new channels of insurance distribution, the existence of the national financial inclusion policy for enhancement of financial literacy in Tanzania.

The insurance market has also contributed to a lot of development in the country. Some of them being, contributed to consumer education and corporate responsibilities; it has educated the public and ensured that part of the benefits to support the public. Development of Tanzania imports insurance portal, which captures all reports of data of marine imports to comply with the insurance Act No: 10 of 2009 section 133. Development of Own Risk and Solvency Assessment (ORSA) and risk-based capital to insurers. As of 2018, the authority was finalizing the report analysis before operating officially.

According to a 2016 report by Financial Sector Depending Trust (FSDT Tz), nearly 80% of Tanzanians live in rural areas and they depend on small-scale agriculture for livelihood. Hence, most of them buy health insurance even with the importance of agriculture in Tanzania. Some people in the rural areas are not able to buy agricultural insurance and this is because of factors like underdeveloped infrastructure, inconsistent incomes, and high population growth. These factors create an imperative for microinsurance as risk management tools in the rural agricultural-based society. This has led to a negative perception and lack of trust which has resulted to allowing uptake of voluntary insurance products. After the formation of TIRA in 2009, the authority has set up plans to introduce regulations that will largely focus on opening the intermediation space for microinsurance.

 Photo credit: BOT quarterly Economic Bulletins 2011- 2015 & TIRA Computations.

There has been a rapid growth in the number of adults taking up insurance from only 2.8% of adults in 2006 to a growth rate of about 127% in 2009 (FSDT Tz 2016). Insurance has played a big role in the economic growth and development of Tanzania, which creates a need to spread more awareness and encouraging Tanzanian citizens to buy insurance policies. It gives the policyholder some sense of security in case anything happens to them or their property. Insurance has also promoted GDP growth, per capita income, money supply, and government finance. Which continues to emphasize the importance of educating the public on the importance of insurance, even the ones in rural areas.