Review VAT on insurance products to spur growth

Regional financial services firm, Britam, recently launched operations in Rwanda, starting with general insurance services. Business Times’ Ben Gasore caught up with the firm’s country manager, Reuben Kibiru, who gives an insight into what should be done to increase insurance uptake. He also explained Britam’s plans for Rwanda. QUESTION: Just 1.6 per cent of the Rwandan population is insured, according to the central bank. What can be done to encourage more people to buy insurance policies? ANSWER: The biggest part of the 1.6 per cent insurance penetration in Rwanda is made up of medical cover. This is good because it ensures people are energetic and healthy to work and grow the economy. However, when we look at other products, the uptake is minimal. There have been many fires and floods lately; what happens when they occur? People close their stores because they don’t have capital to inject in the destroyed business, those who are lucky and have some savings start afresh. But it is always hard for them. That’s why insurance comes in handy, if one has insured their business against risks like fire or burglary. However, there is need to review the 18 per cent Value Added Tax (VAT) on some insurance products because it makes them expensive and unattractive to potential clients. Products that are tax exempt are doing; for instance, life insurance and medical cover, have the better uptake rates. It would be a good idea to scrap or lower some of the taxes to increase penetration levels because for every Rwf100 a client pays for motor insurance, they pay Rwf18; that’s the 18 per cent VAT on the products. The other key issue is for players to embrace technology. The insurance sector is performing poorly in ICT usage compared to banks. For instance, a bank customer is able to withdraw money from their account using a mobile phone. The insurance industry is still lagging behind in use of ICT platforms to ease access and ensure convenience for clients. Britam understands the importance of ICT; that why we have invested in ICT infrastructure to improve operational efficiencies and analytical capabilities. Once our new system is fully deployed, insurance products from Britam will be available at the convenience of customers. Thirdly, the sector also needs to distribute products widely so that people know and appreciate them. The sector lacks skilled manpower, which partly explains the poor product distribution and policy uptake levels. How will you handle the situation? We are strong when it comes to developing insurance agents. We have so far recruited about 20 people as agents in Rwanda, who are at various stages of acquiring accreditation and licenses from the National Bank of Rwanda (BNR). In the meantime, we are training and equipping them with more knowledge about insurance and marketing of insurance products. We will also train them on how to present themselves, how they can be more entrepreneurial; and expose them to other insurance agents and managers doing well in Africa. That way, we will have created all-round people who can interact with the uninsured in a friendlier and professional way, from a skills-based point of view. The country is implementing its medium-term growth blueprint, the second Economic Development and Poverty Reduction Strategy (EDPRS II), how are you preparing to contribute to the attainment of its objectives? EDPRS II has a number of focal points like information communication and technology, and youth, rural development, agriculture, mining and employment. There are also six towns that the government is going to focus on, driven mainly by certain economic activities, and develop into satellite cities. We want to create a presence in those towns to support the government efforts and also support public-private partnerships that benefit us and promote the country’s drive to attain a middle-class status in the medium-term. We will achieve this by aligning our strategies to economic trends and the government’s priorities. So far, we have created jobs for 20 Rwandans, and by the end of the year we will have opened a branch in one of the proposed satellite cities and create more jobs. Any other plans apart from your interest in the insurance business? We intend to enter the real estate industry to provide affordable housing and working space through our sister company Britam Property. Britam has at least three legs that it will use to create a stronghold in the Rwandan market. There is the asset management arm of the firm besides the insurance business and Britam Property. So we can enter the real estate market through any of these three ways.