“Governance, risk, and compliance- The Rwandan Insurance Industry”, is a result of extensive research into the insurance regulatory framework in Rwanda. It provides a detailed analysis of the insurance regulations for life, property, motor, liability, personal accident, health, marine, aviation, and transit insurance. The Rwandan insurance industry is supervised and regulated by the National Bank of Rwanda (Banque Nationale du Rwanda), BNR was established in 1964. Its role is to regulate the insurance industry, stipulated in the law. Regulation No. 06 of 2009, regulations No. 12 of 2009, and regulations No. 01 of 2010 regulates the Rwandan insurance industry.
According to the World Bank Group 2019 report, the Republic of Rwanda has undergone a rapid economic transformation over the past twenty years. The economy is transforming from a low-income agricultural economy to a knowledge-based, service-oriented economy. The change is largely influenced by the economic and structural initiatives of the government. The insurance market in Rwanda is relatively small compared to other East African countries, it is also at an early stage of development. Despite having a small market size and low penetration, the growth of the insurance market is quite encouraging. As of 2010-2017 insurance sector recorded a growth rate of 13% at CAGR. Rwanda inherited a “free of charge” health care policy in 1962 upon independence, but the policy was revealed to be unrealistic, ineffective, and unsustainable, hence abandoned.
The table below shows Insurance Penetration vs GDP per Capita.
The Republic of Rwanda’s real GDP has grown at a rate of 7.8% in 2007-2017. The authorities have supported both external and fiscal sustainability and unpromoted the development of a vibrant private sector. According to the World Bank Group 2019 report, the 6.1% economic expansion in 2017 was driven by strong growth in all three major sectors illustrating the diversified nature of the country’s economic industry. The economy grew by 10.6% in 2018 and it was estimated that the GDP growth rate will accelerate to 7.2%, 7.5%, and 7.8% in 2018, 2019, and 2020, respectively. As of 2019, the insurance penetration was at 1.6% lower than the rest of East African countries, the government had the vision to increase insurance penetration to 7% in 2020.
In Rwanda, there are several ways of buying insurance; directly from an insurance company, buying through an independent local agent, or buying through an independent online insurance broker. The government’s focus on Universal Health Coverage (UHC) has played an important role in creating nationwide awareness about the insurance concept. The community-Based Health Insurance, CBHI, has indirectly greatly contributed to creating awareness around medical insurance and general insurance resulting in aiding insurance market development. Rwanda has had national health insurance for 11 years now; 92% of the nation is covered, and the premiums are $2 a year (Donald G. McNeil Jr., 2010), The New York Times. Rwanda requires to put more effort to sustain the increasing trends in the coverage of family planning and professional assistance of delivery in health facilities and to improve the quality of reproductive health services.
The Rwandan insurance sector is observed to face a couple of challenges like; Excessive reliance on compulsion, motor insurance represents a third of the total premiums in Rwanda’s private insurers and medical insurance represents over a fourth of the total premiums. Unhealthy competition between insurers to sell the small number of traditional products, insurers battling one another, involving in price-cutting and other behaviors. Lack of innovation, inadequate skills, lack of quality data and market research, and limited resources for research and development. Low trust in the insurance sector and limited investment instruments for insurance asset management. With some few changes like developing technical skills to strengthen the insurance sector, fostering “blue ocean” innovation through targeted leadership, enhanced supervision of the insurance sector, consumer protection, and architectural redesign of the insurance sector, will bring a great contribution to the insurance sector in the republic of Rwanda.
Insurance contributes to economic growth and poverty reduction through two mechanisms: risk management and financial intermediation. In risk management, the insurance sector supports infrastructure investments and facilitates international trade, developing credit markets, and allows the government to free up fiscal space and reduce the uncertainty of contingent liabilities by transferring some risks. Insurance assists property market and infrastructure development which is necessary for macroeconomic development and poverty alleviation. Insurance helps to increase sources of long-term finance in emerging markets and developing economies. The insurance concept and the insurance industry at large have developed to a maturity stage able to react to new risks appropriately.
The government of Rwanda has done well to develop the economy and to change the state of the economy, with a few adjustments the country is projected to do much better not only in the economic growth but also in the insurance sector. BNR also has a role to play to improve the insurance sector, the body should take part to raise awareness for insurance, medical/ health insurance, motor insurance, and general insurance.