‘Emerging risks to business call for review of insurance’

In the previous rain season, a number of vehicles and other properties were hit and destroyed by falling trees and poles during storms. Lives were also lost in some of these incidents. Recently, suspected Al Shabab terrorists wrecked havoc in neighbouring Kenya when they attacked the Westgate Mall, leaving about 70 people dead and hundreds injured and property worth millions of dollars destroyed. These new threats mean that business people need to think outside the box as far as safeguarding their enterprises is concerned. How a business and its owner get back to their former status after such an occurrence should now be every entrepreneur’s concern. Ordinarily, most business people and property owners will buy fire policies. But there are new and devastating threats to businesses today, making it urgent for enterprise and property owners to rethink their insurance plans and expand budgets to take care of them. The penetration rate is still low at 2.3 per cent. Among the emerging threats that consumers might want to be covered against include terrorism, natural catastrophes like storms, rain and earthquakes and life insurance. Under this policy, clients can be covered under funeral insurance, where the insurer meets the costs of their burials or evacuation in-case one is gravely ill or involved in an accident and requires urgent medical attention.Farmers can take agriculture insurance policies where farmers insure their crops and animals against risks that could affect their crops productivity like drought and floods due to the unpredictable weather patterns. Ironically, stakeholders in the insurance sector are still more concerned about the basic policies compared to comprehensive policies that cover risks such as terrorism. It’s strange, but true. “Before thinking of such comprehensive policies, we should seek to increase the penetration of the basic policies which are yet to be taken up leaving out a large percentage exposed,” says the deputy general manager of Phoenix Insurance, Gaudens Kanamugire. Kanamugire points out that some of those who take up policies don’t do it willingly. “People buy policies because it is a requirement from financiers or government,” he notes. Among the factors that have held back insurance penetration is little knowledge on the need of insurance, he adds. “Few are aware of the need for insurance and how much it can salvage their situation partly due to the education system. People need to be sensitised to understand what insurance is about and how they stand to benefit.”Kanamugire cited poverty as another reason for low insurance penetration. He points out that though insurance is important; it is never on the list of people’s priorities since it is not a basic need. “If authorities made it a requirement that one gets a licence to run a business they have to be insured, at least for basic risks, it can improve the situation. This will not only grow the insurance sector, but will assist in stabilising the economy as investments are safer,” he argues. Edwin Habineza, a consultant, who previously worked with several insurance companies across East Africa, however blames insurance companies for the low cover uptake, saying they lack innovation and creativity. “The insurance policies of most local providers are similar and not tailor-made to attract the clients. When all products are similar, clients will hardly take interest in them. Insurers need to be more aggressive, conduct better research and come up with products that will make sense to clients,” he advises.Habineza adds that most firms lack the necessary skills, leading to poor service delivery and at times ‘under insurance’. “You find a number of firms with the same policy, but differently priced. When insurance firms price premiums differently, there is a big chance of under-insurance making them unable to pay claims.” He argues that the insurance industry is also unpopular because most insurers have failed to pay claims for years. “This has resulted into loss of trust, with local businesses preferring to insure with foreign firms. This unprofessional conduct has scared away people while other potential clients have resorted to unsustainable ways like welfare societies,” Habineza points out. Fiona Mutoni, a small business owner in Kimironko, says insurers are unreliable.“You would rather be a member of welfare societies and sacoos because they are more reliable compared to many local insurance companies. Most people with policies are highly inconvenienced when the calamities hit, with insurers taking long to compensate the policy owners or never paying up altogether,” she says. She notes that welfare societies pay up almost instantly because the members’ contributions are deposited in the bank and are easily accessible when required. Mutoni says most business people, especially small-and-medium enterprises, see insurance as a ‘third need’. “We don’t prioritise insurance because our incomes and profit margins don’t allow us. We have little disposable incomes and, since it is not a requirement, you suspend it until when your earning allows,” she points.Only two insurance products are compulsory in Rwanda - motor insurance and general health insurance.“There is a huge potential to be explored which can also increase the penetration rate,” Jean Pierre Majoro, the executive secretary of the Association of Rwanda Insurers, says. Majoro adds that the growth of the insurance sector is everyone’s business, especially insurance firms, brokers, products and services advertisement.