Rwanda’s insurance sector is grappling with challenges that limit the uptake of insurance services and products, despite significant growth the industry has made over the past few years.

By the end of June 2024, insurance sector's total assets had reached Rwf1,031.3 billion, an increase of 17.6 per cent from the same period in 2023, thanks to higher investment income and improved underwriting performance.

However, insurance penetration remains at 2.1 per cent, way below the global average of 7 per cent, reflecting an industry with untapped potential.

Experts suggest that the industry must address the many challenges it currently faces to be able to transform to serve many Rwandans who currently have no access to any form of insurance.

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The National Bank of Rwanda (BNR) is currently working with insurers to develop a national insurance strategy that could boost the uptake of the insurance in the country.

But what is limiting this uptake?

Digitisation

The Governor of the National Bank of Rwanda, John Rwangombwa pointed out that the insurance sector remains the most underdeveloped compared to other financial services providers, saying this indicates there is room for innovation to tap into digital channels of delivering insurance products.

He said that the new insurance strategy being developed will drive innovation and digitisation through creative insurance solutions that address emerging risks and cater to diversified needs of people, while ensuring data protection and privacy strategies are robust.

On the other hand, Samuel Tayengwa, CEO of Transunion Rwanda, emphasised that insurance is not a bought product but a sold product, which calls for intentionality in making offerings visible by leveraging technology to transform the insurance landscape.

"We need to start expanding our wing to the young people who are familiar with some of these tools and technologies. Our role is to guide the process and their role is to show us how it [technologies] works,” he said.

Mistrust in sharing data

He further noted that the insurance sector has a great amount of data but lack of data sharing hampers the potential for the industry to make informed decisions to develop the sector.

"Let us have access to your data and give you insights from your data to curb the over-indebtedness of some of customers,” he remarked at the recent gathering of insurers, adding that there is a need to invest in building the skill-set.

Risk-based premium

Tayengwa emphasised that a risk-based premium model should consider shared concepts of risk in its pricing. For example, currently, a car parked for a day is charged the same premium as a car driven thousands of miles. This approach doesn't accurately reflect the varying levels of risk associated with different usage patterns.

"The concept of risk-based pricing has to stretch beyond just talking about it and become more pragmatic,” he said, adding that there is a need for a regulatory framework that allows pricing to be fair.

This would allow for affordability among the people and increase insurance penetration.

Andrew Kulayige, Chairperson of Rwanda Association of Insurers (ASSAR), said that there is a work being done around instating a risk-based premium model in the sector, but acknowledges that it has been happening at a slow pace.

Sustainability, green transition

The experts who had gathered at BNR gathering of insurers indicated that the insurance sector has a critical role to play in the mitigation and adaptability to climate change as one of the key challenges the world is facing.

"The insurance sector must step in to develop innovative solutions that provide financial protection of our citizens but also alleviate fiscal burden on the government in times of crises,” Rwangombwa noted.

Last year’s floods that hit the Western Province and cost the government some $300 million in disaster recovery reflects a need that insurers should have addressed, as well as an opportunity to do business.

Kampeta Sayinzoga, CEO of the Development Bank of Rwanda (BRD), maintained that insurance firms need to integrate Environmental, Social, and Governance (ESG) principleswithin their operational strategies and communicate it to clients.

"If you’re not able to advise your client on how to mitigate these risks, you’re actually exposing yourself to the likelihood of higher payout. The capacity to handle climate risk has to be embedded in your product proposition,” she weighed in.

Research, product tailoring

Sammy Makove, CEO of Insurance Regulatory Authority (IRA) in Kenya, suggested that the industry needs to conduct thorough research to assess market behavior, needs, and purchasing power, which would inform product innovation.

According to him, insurance products should be customer-centric while creating awareness to break cultural barriers.