HERITAGE Insurance has launched a new range of insurance policies that are affordable, flexible and easy to understand.
The policies dubbed 'Ahadi Insurance' will enable customers to choose how they want to make payments through a wide range of methods ranging from cash to M-Pesa.
Speaking during the launch held in Dar es Salaam, Heritage Insurance General Manager, Mr John Haenen said that with 'Ahadi Insurance,' nobody needs to run the risk of not being insured and have to suffer the damaging and costly consequences of any kind of loss.
He said that after conducting research, Heritage found that people wanted insurance that wasn't complicated, that was affordable, also written in Kiswahili and provided by a company that they could trust.
Heritage then set about designing a range of affordable insurance policies specifically for local people to enable them to insure his business, property, car and even himself at not great cost but still be able get the widest cover similar to what is available to big companies, he said.
He said that with 'Ahadi Insurance,' Heritage had used its many skills and knowledge about insurance to create a simple application form, in English and Kiswahili.
He said that customers will be able to choose what insurance best suits him and then let him decide how he wants to pay that suits his pocket, either monthly, quarterly or annually.
He said that customers would pay their premiums through a range of different payment methods which includes cash, cheque and standing order, M-Pesa or Zain Zap - and if he forgets he will receive an SMS from Ahadi to gently remind him.
"When it comes to a claim, Heritage guarantees to settle it within 3 days once it has been validated so there are no lengthy delays in waiting for the claim to be paid out," he said.
He said that the company has emerged as market leader in the insurance industry, writing gross annual premium of 22.67bn/- during 2006. With a paid up capital of 2.85bn/- and that the company's net assets exceed 7bn/- becoming the largest private insurance company in Tanzania.
Heritages achievements can be attributed to a very prudent and professional management, financial strength, a highly developed strategic focus and sustained support from our business partners. Constant attention to our core values - honesty, he noted.
Taken from - http://www.dailynews.co.tz/business/?n=10909&cat=business
Thursday, June 24, 2010
Health Insurance Market Penetration Low
Studies show that Tanzanians insure property, not their health. A new player in the Tanzanian Insurance Market called Resolution Health East Africa Ltd (RHEAL), wants to change this.
A RECENT study has found that only four per cent of the 126-million strong population of the five member countries of the East African Community – Kenya, Uganda, Rwanda, Burundi and Tanzania – can be said to have some sort of medical insurance cover for themselves and/or members of their families.
The chief executive officer of the Resolution Health East Africa Ltd (RHEAL), Peter Nduati, told Business Times that, basically, this is contributed to by popular apathy. Most people continue to nurture a mindset to the general effect that personal health matters take the backseat, while property – vehicles, buildings, etc – take priority in the insurance stakes!
For his part, a RHEAL director, Leonard Chacha, said "culture is the major problem that hinders many of the local populace from valuing and purchasing health insurance.”
He adds that “it is astonishing to see people preferring to buy insurance for their cars and houses while they won't insure themselves and their families on medical matters!”
In the event, he called upon the peoples of the East African region “to wake up and buy health insurance which is very important to them when they are healthy and working... And even when they retire!”
RHEAL is a Kenya-based company with a presence in Dar es Salaam. According to the Resolution Health country manager for Tanzania, Dennis Lumula, health insurance in Tanzania is lower in terms of coverage than it is in, say, neighbouring Kenya and Uganda. This is basically because the existing service providers target certain markets as a matter of course – especially body corporates, as well as middle and top income earners.
As a result, the majority of Tanzanians – especially low income earners and those living in rural areas – fail to access the opportunities which are already available locally to insure themselves and their families for better health services.
In that regard, the company's group chief executive, Peter Nduati, told Business Times that Resolution Health Ltd would make sure that a healthy lifestyle is promoted in Tanzania, and elsewhere in the EA region, with much confidentiality for its clients.
“ will not rest until we become the market leaders in East Africa,” the man stressed.
Resolution Health East Africa Limited was registered in Kenya in August 2002, and has complied with all the requirements that relate to Medical Insurance Providers.
It was registered in Tanzania under the Tanzania Insurance Regulatory Authority (TIRA), and clearance to do business in Tanzania beginning in 2010 has already been granted by the Commissioner for Insurance at the Treasury. The company has also been registered for operations in Uganda. There are plans to cover the whole EA region and Eastern DRC.
Nduati says Resolution Health “has contracted over 250 medical service providers within the EAC region to ensure that our members have access to medical attention within their respective locations.
In any case, people living outside Tanzania and Kenya – as well as clients who experience health problems when outside their countries – can still access the company's services through its accredited agents spread across the region.
“The company has unique types of products for both individual and corporate clients – all with lower costs compared with the traditional service providers,” Nduati revealed.
Unlike other existing players who sometimes exclude certain health problems in their services, Resolution Health Limited will also cover HIV/Aids – but with special costing, he said.
Through the arrangement, HIV-positive clients would benefit under supplemental cover such as nutritions, preventing pregnant mother-to-child infections, ARVs and the treatment of opportunistic infections.
He said future plans include making Resolution Health a fully fledged insurance company. Nduati said RHEAL would cater for both individual clients and corporate groups... "In both categories, we give members options of getting in-patient, out-patient, maternity, dental and optical services.
“Corporate products are designed for groups and companies with a minimum of ten principal members. The annual limits range from a minimum of US$1,490, up to a maximum of US$29,800. The product can be taken on a 'per-person' basis, on an annual limit – or have the annual limit shared within the family members for both inpatient and outpatient services.
“Our products meet with your requirements by providing unique cover options either for you as an individual, or for your organization.
“Whether you are joining as an individual or as a corporate, Resolution Health shall waive waiting periods for members transferring from another medical provider. The covers given are currently available in Tanzania, Uganda and Kenya – at no additional cost.”
RHEAL also offers discounted spousal rates and additional insurance-based benefits: personal accident, critical illness and daily cash as part of the benefits – also at no extra cost. Commenting on medical inflation, the official said this currently stands at around seven per cent. This is still relatively low compared with Kenya and Uganda where the medical inflation rate is up to 30 per cent! Usually, medical inflation in Tanzania – and, indeed, elsewhere – is caused by investments in medical diagnostic technologies.
However, the issue of regulation in Tanzania has remained a challenge to new entrants in the market. In fact, weaknesses in the extant regulations force some of the new players in the health/medical insurance to unnecessarily incur extra operational costs.
Lumula says the regulations allow a new player to register as an insurance broker or company, noting that this adds costs on the direct charges, requirements and fees imposed in the sector.
All this notwithstanding, however, Resolution Health East Africa Limited announces its increased presence in Tanzania. This is in an effort to boost the medical insurance sub-sector – and, hopefully, get more Tanzanians to insure their health, as well as their cars and houses!
Taken from - http://www.businesstimes.co.tz/index.php?option=com_content&view=article&id=114:health-insurance-market-penetration-low&catid=1:latest-news&Itemid=50
A RECENT study has found that only four per cent of the 126-million strong population of the five member countries of the East African Community – Kenya, Uganda, Rwanda, Burundi and Tanzania – can be said to have some sort of medical insurance cover for themselves and/or members of their families.
The chief executive officer of the Resolution Health East Africa Ltd (RHEAL), Peter Nduati, told Business Times that, basically, this is contributed to by popular apathy. Most people continue to nurture a mindset to the general effect that personal health matters take the backseat, while property – vehicles, buildings, etc – take priority in the insurance stakes!
For his part, a RHEAL director, Leonard Chacha, said "culture is the major problem that hinders many of the local populace from valuing and purchasing health insurance.”
He adds that “it is astonishing to see people preferring to buy insurance for their cars and houses while they won't insure themselves and their families on medical matters!”
In the event, he called upon the peoples of the East African region “to wake up and buy health insurance which is very important to them when they are healthy and working... And even when they retire!”
RHEAL is a Kenya-based company with a presence in Dar es Salaam. According to the Resolution Health country manager for Tanzania, Dennis Lumula, health insurance in Tanzania is lower in terms of coverage than it is in, say, neighbouring Kenya and Uganda. This is basically because the existing service providers target certain markets as a matter of course – especially body corporates, as well as middle and top income earners.
As a result, the majority of Tanzanians – especially low income earners and those living in rural areas – fail to access the opportunities which are already available locally to insure themselves and their families for better health services.
In that regard, the company's group chief executive, Peter Nduati, told Business Times that Resolution Health Ltd would make sure that a healthy lifestyle is promoted in Tanzania, and elsewhere in the EA region, with much confidentiality for its clients.
“ will not rest until we become the market leaders in East Africa,” the man stressed.
Resolution Health East Africa Limited was registered in Kenya in August 2002, and has complied with all the requirements that relate to Medical Insurance Providers.
It was registered in Tanzania under the Tanzania Insurance Regulatory Authority (TIRA), and clearance to do business in Tanzania beginning in 2010 has already been granted by the Commissioner for Insurance at the Treasury. The company has also been registered for operations in Uganda. There are plans to cover the whole EA region and Eastern DRC.
Nduati says Resolution Health “has contracted over 250 medical service providers within the EAC region to ensure that our members have access to medical attention within their respective locations.
In any case, people living outside Tanzania and Kenya – as well as clients who experience health problems when outside their countries – can still access the company's services through its accredited agents spread across the region.
“The company has unique types of products for both individual and corporate clients – all with lower costs compared with the traditional service providers,” Nduati revealed.
Unlike other existing players who sometimes exclude certain health problems in their services, Resolution Health Limited will also cover HIV/Aids – but with special costing, he said.
Through the arrangement, HIV-positive clients would benefit under supplemental cover such as nutritions, preventing pregnant mother-to-child infections, ARVs and the treatment of opportunistic infections.
He said future plans include making Resolution Health a fully fledged insurance company. Nduati said RHEAL would cater for both individual clients and corporate groups... "In both categories, we give members options of getting in-patient, out-patient, maternity, dental and optical services.
“Corporate products are designed for groups and companies with a minimum of ten principal members. The annual limits range from a minimum of US$1,490, up to a maximum of US$29,800. The product can be taken on a 'per-person' basis, on an annual limit – or have the annual limit shared within the family members for both inpatient and outpatient services.
“Our products meet with your requirements by providing unique cover options either for you as an individual, or for your organization.
“Whether you are joining as an individual or as a corporate, Resolution Health shall waive waiting periods for members transferring from another medical provider. The covers given are currently available in Tanzania, Uganda and Kenya – at no additional cost.”
RHEAL also offers discounted spousal rates and additional insurance-based benefits: personal accident, critical illness and daily cash as part of the benefits – also at no extra cost. Commenting on medical inflation, the official said this currently stands at around seven per cent. This is still relatively low compared with Kenya and Uganda where the medical inflation rate is up to 30 per cent! Usually, medical inflation in Tanzania – and, indeed, elsewhere – is caused by investments in medical diagnostic technologies.
However, the issue of regulation in Tanzania has remained a challenge to new entrants in the market. In fact, weaknesses in the extant regulations force some of the new players in the health/medical insurance to unnecessarily incur extra operational costs.
Lumula says the regulations allow a new player to register as an insurance broker or company, noting that this adds costs on the direct charges, requirements and fees imposed in the sector.
All this notwithstanding, however, Resolution Health East Africa Limited announces its increased presence in Tanzania. This is in an effort to boost the medical insurance sub-sector – and, hopefully, get more Tanzanians to insure their health, as well as their cars and houses!
Taken from - http://www.businesstimes.co.tz/index.php?option=com_content&view=article&id=114:health-insurance-market-penetration-low&catid=1:latest-news&Itemid=50
Eskadenia implements its insurance software for Heritage Insurance Company in Tanzania
Leading regional software provider Eskadenia Software, successfully deployed its comprehensive package of General Insurance, Financial, Workflow and Document Management software systems for The Heritage Insurance Company in Tanzania within a very short period of time.
The deployed Eskadenia systems were fully designed to help The Heritage Insurance Company Tanzania LTD manage and automate its operations, reduce operational cost, speed up work, ensure a high level of security and improved customer service.
The General Insurance system provides a collaborative environment for information management across the company's departments and allows users to capture up-to-the-minute information whenever required. Moreover, it supports real-time integration with the financial modules of ESKA Business Manager, including the Fixed Assets, Cash Management, HR, and Payroll modules to maintain the needed financial information and accounts updates. The package comes along with advanced Workflow and Document Management systems to complete the automation of The Heritage Insurance Company's operations.
The software package also provides users with advanced real-time reports and statistics in the form of charts, diagrams and management dash boards to analyse operational performance and support the decision making process.
Developed using Microsoft .Net technology and residing on Oracle Database, the web-based systems will allow the company's employees to define insurance products, manage production, In addition to the ability to calculate the prices and instalments automatically and run daily insurance transactions in an efficient and simple manner. Through the systems' location-independent interface, the company efficiently handles greater volumes of operations and smoothly manages work processes.
"Eskadenia demonstrated through this project, its ability to meet new market-entry requirements and complete the project for our valued partner Heritage within the provided challenging time frame. The success of the project has however strongly relied on the cooperation and professionalism demonstrated by Heritage management and staff," said Nael Salah, Managing Director of Eskadenia Software.
"The rapid growth of our company had put our existing software system under severe strain and a replacement system was urgently needed. After researching a number of alternatives we settled on Eskadenia, not only because their system provided a superior fully-integrated solution, but also because we adjudged Eskadenia to be the most responsive and committed vendor. Our faith was not misplaced - despite a very tight timeframe and the need to configure the system to cope with our highly complex reinsurance programmes in multiple currencies, Eskadenia delivered flawlessly and continues to do so," said John Haenen, General Manager of The Heritage Insurance Company Tanzania Limited.
Taken from - http://www.ameinfo.com/234982.html
The deployed Eskadenia systems were fully designed to help The Heritage Insurance Company Tanzania LTD manage and automate its operations, reduce operational cost, speed up work, ensure a high level of security and improved customer service.
The General Insurance system provides a collaborative environment for information management across the company's departments and allows users to capture up-to-the-minute information whenever required. Moreover, it supports real-time integration with the financial modules of ESKA Business Manager, including the Fixed Assets, Cash Management, HR, and Payroll modules to maintain the needed financial information and accounts updates. The package comes along with advanced Workflow and Document Management systems to complete the automation of The Heritage Insurance Company's operations.
The software package also provides users with advanced real-time reports and statistics in the form of charts, diagrams and management dash boards to analyse operational performance and support the decision making process.
Developed using Microsoft .Net technology and residing on Oracle Database, the web-based systems will allow the company's employees to define insurance products, manage production, In addition to the ability to calculate the prices and instalments automatically and run daily insurance transactions in an efficient and simple manner. Through the systems' location-independent interface, the company efficiently handles greater volumes of operations and smoothly manages work processes.
"Eskadenia demonstrated through this project, its ability to meet new market-entry requirements and complete the project for our valued partner Heritage within the provided challenging time frame. The success of the project has however strongly relied on the cooperation and professionalism demonstrated by Heritage management and staff," said Nael Salah, Managing Director of Eskadenia Software.
"The rapid growth of our company had put our existing software system under severe strain and a replacement system was urgently needed. After researching a number of alternatives we settled on Eskadenia, not only because their system provided a superior fully-integrated solution, but also because we adjudged Eskadenia to be the most responsive and committed vendor. Our faith was not misplaced - despite a very tight timeframe and the need to configure the system to cope with our highly complex reinsurance programmes in multiple currencies, Eskadenia delivered flawlessly and continues to do so," said John Haenen, General Manager of The Heritage Insurance Company Tanzania Limited.
Taken from - http://www.ameinfo.com/234982.html
New Insurance Act 2009
Introduction:
The regulation of Insurance Market in Tanzania existed since its liberalization of the Industry in year 1996. The Insurance Act Cap 394 of year 1996 was a product of economic and financial sector liberalization carried out by the government of Tanzania from the second half of 1980s to date. The wind of change did not spare the insurance sector, hence in year 1996 a new insurance Act was enacted of which section 5 provided for establishment of an agency of
the government known as Insurance Supervisory Department (ISD). The need to have regulatory framework was born due to opening up of the insurance market for private players contrary to the previous era when there was only NIC in mainland and ZIC in Island. The main objectives of ISD, among others, were to provide superintendence of the conduct of insurers, brokers and agents; formulate standards in the conduct of the business and afford guidance to the players. As time passed, the Act fell short of expectations of the market therefore calling for its review.
The process of enacting the new Act commenced in year 2007 and continued up to April 2009 when the National Assembly unanimously passed it and His excellence the President ascended on May hence the new law came into effect on July 1, 2009. The declaration of the effective date of the new Act was done through the Government Notice No. 266 Published on 24th July 2009, which section 2 read as follows:
“The 1st day of July, 2009 is hereby appointed to be the date on which the Insurance Act, 2009 shall come into operation”
From the above declaration, it means the Insurance Act Cap 394 enacted in year 1996 was repealed and the new Insurance Act 2009 came into force. However it must be noted that the repealed law set structures where different officers were appointed to function. As such Section 168 (2) restores those structures and appointed or employed officers as if they are appointed or employed under the new legislation.
Salient features of the new Act:
The new Insurance Law is among the best insurance legislations in Africa. This fact may be attested to by looking through the salient features of the Act which are as follows:
Main features of the Act:
• The new Act is establishing an Independent Regulatory Authority known as “Tanzania Insurance Regulatory Authority” departing totally from the previous Act which established an agency of the government known as an Insurance Supervisory Department. The Authority will operate independently as per the requirements of the core principles of insurance supervision formulated by the
International Association of Insurance Supervisors (IAIS). The main objectives of the Authority and its functions are provided under section 6 of the Act, which include Promotion and maintenance of efficient, fair, safe and stable insurance market for the benefit and protection of insurance policyholders. (See sections 5 & 6 of the Act)
• The appointment of the Commissioner and Deputy Commissioner were previously being made by the Minister. The new Act prescribes that the two shall be appointed by the President. Their qualifications are also given as possession of adequate knowledge and experience in Insurance Industry. (Sections 7 & 8 of the Act).
• The role of the National Insurance Board is now more of a functional nature than it was previously. This is to ensure that there is good governance in the Authority as far as oversight exercise of the Board is concerned. Section 14 of the Act provide core functions of the Board to include, provision of guidance to
the Authority Generally in the supervision of insurance business in the country and to ensure that the Authority undertakes its activities in a competent manner.
• Even the composition of the Board membership has changed as per section 13 (2), which the coming new Board will include professionals from the industry or related sectors and other recognised institutions which are related to the insurance sector, contrary to the previous membership structure.
The following are completely new features of the new Act:
• Establishment of a special insurance tribunal, technically known as Ombudsman services. (See section 122) The main function of this institution is to resolve disputes arising between policyholders and insurers on the contracts of insurance. (See section 124). The Insurance Ombudsman will function as a quasi- court under a very senior legal practitioner like a retired judge of the High court of Tanzania and alike. The whole of Part ix (a) of the Act deals with Ombudsman services.
• Establishment of an Appeals Tribunal which is a body to deal with all appeals against the decision of the Commissioner of Insurance which affect Insurers, Brokers and Agents. (See section 126 of the Act). Any aggrieved person from the decision of the Commissioner may appeal to the Tribunal. Under the repealed law such appeals would go to the Minister responsible for Finance.
• The right to declare a “Bad faith claim” against Insurance Company if same fails to settle a claim within a statutory time limit of 45 days after admitting liability. Also when liability under normal circumstances is supposed to be admitted but an insurer refuses to do so. Section 131 (3) define the term bad faith claim and its consequences. This is also a new feature which never existed before.
• The new law also provides guidance to the Management of the Authority on the use of funds appropriated by Parliament or from levies or any sum of money which the board may borrow. (See part x of the Act).
• Offences and Penalties as covered in Part xii of the Act. The new law is clearer on the issue of Penalties and Prosecution of offenders of the insurance industry. The Commissioner of Insurance is mandated to prosecute offenders of Insurance in a court of law upon receipt of consent from the Director of Public Prosecution (DPP) (See Section 164). Also the offenders have been given alternative to pay fine as will be prescribed by the Commissioner. If they refuse then they will face criminal charges in a court of law.
• The new Law also gives the Commissioner the right to issue a cease and desist order to the Insurance registrant where in the opinion of the Commissioner a person registered to conduct insurance business is conducting business in an unlawful or unethical manner. (See section 165 (i))
• Apart from imposing an overall duty of care of Directors and Officers to policyholders, the new law also provides for consultation before any changes to regulations are proposed to the government. Other features of the law are like a requirement for an insurer to establish audit and investment committees, placing of additional duties for auditors, definition of related party transactions and the requirement that actuarial valuation of a Non life fund shall be carried out after every two years.
In conclusion, it must be noted that changes that are effected in the insurance market of Tanzania with the operation of a new Insurance law are quite pertinent and are geared towards aligning the market insurance practice with best International practice as provided under core principles of the International Association of Insurance Supervisors (IAIS).
PRESENTATION MADE TO THE BOARD MEMBERS ON 26TH AUGUST 2009
By PAUL JOEL . NGWEMBE
DIRECTOR OF LEGAL SERVICES
The regulation of Insurance Market in Tanzania existed since its liberalization of the Industry in year 1996. The Insurance Act Cap 394 of year 1996 was a product of economic and financial sector liberalization carried out by the government of Tanzania from the second half of 1980s to date. The wind of change did not spare the insurance sector, hence in year 1996 a new insurance Act was enacted of which section 5 provided for establishment of an agency of
the government known as Insurance Supervisory Department (ISD). The need to have regulatory framework was born due to opening up of the insurance market for private players contrary to the previous era when there was only NIC in mainland and ZIC in Island. The main objectives of ISD, among others, were to provide superintendence of the conduct of insurers, brokers and agents; formulate standards in the conduct of the business and afford guidance to the players. As time passed, the Act fell short of expectations of the market therefore calling for its review.
The process of enacting the new Act commenced in year 2007 and continued up to April 2009 when the National Assembly unanimously passed it and His excellence the President ascended on May hence the new law came into effect on July 1, 2009. The declaration of the effective date of the new Act was done through the Government Notice No. 266 Published on 24th July 2009, which section 2 read as follows:
“The 1st day of July, 2009 is hereby appointed to be the date on which the Insurance Act, 2009 shall come into operation”
From the above declaration, it means the Insurance Act Cap 394 enacted in year 1996 was repealed and the new Insurance Act 2009 came into force. However it must be noted that the repealed law set structures where different officers were appointed to function. As such Section 168 (2) restores those structures and appointed or employed officers as if they are appointed or employed under the new legislation.
Salient features of the new Act:
The new Insurance Law is among the best insurance legislations in Africa. This fact may be attested to by looking through the salient features of the Act which are as follows:
Main features of the Act:
• The new Act is establishing an Independent Regulatory Authority known as “Tanzania Insurance Regulatory Authority” departing totally from the previous Act which established an agency of the government known as an Insurance Supervisory Department. The Authority will operate independently as per the requirements of the core principles of insurance supervision formulated by the
International Association of Insurance Supervisors (IAIS). The main objectives of the Authority and its functions are provided under section 6 of the Act, which include Promotion and maintenance of efficient, fair, safe and stable insurance market for the benefit and protection of insurance policyholders. (See sections 5 & 6 of the Act)
• The appointment of the Commissioner and Deputy Commissioner were previously being made by the Minister. The new Act prescribes that the two shall be appointed by the President. Their qualifications are also given as possession of adequate knowledge and experience in Insurance Industry. (Sections 7 & 8 of the Act).
• The role of the National Insurance Board is now more of a functional nature than it was previously. This is to ensure that there is good governance in the Authority as far as oversight exercise of the Board is concerned. Section 14 of the Act provide core functions of the Board to include, provision of guidance to
the Authority Generally in the supervision of insurance business in the country and to ensure that the Authority undertakes its activities in a competent manner.
• Even the composition of the Board membership has changed as per section 13 (2), which the coming new Board will include professionals from the industry or related sectors and other recognised institutions which are related to the insurance sector, contrary to the previous membership structure.
The following are completely new features of the new Act:
• Establishment of a special insurance tribunal, technically known as Ombudsman services. (See section 122) The main function of this institution is to resolve disputes arising between policyholders and insurers on the contracts of insurance. (See section 124). The Insurance Ombudsman will function as a quasi- court under a very senior legal practitioner like a retired judge of the High court of Tanzania and alike. The whole of Part ix (a) of the Act deals with Ombudsman services.
• Establishment of an Appeals Tribunal which is a body to deal with all appeals against the decision of the Commissioner of Insurance which affect Insurers, Brokers and Agents. (See section 126 of the Act). Any aggrieved person from the decision of the Commissioner may appeal to the Tribunal. Under the repealed law such appeals would go to the Minister responsible for Finance.
• The right to declare a “Bad faith claim” against Insurance Company if same fails to settle a claim within a statutory time limit of 45 days after admitting liability. Also when liability under normal circumstances is supposed to be admitted but an insurer refuses to do so. Section 131 (3) define the term bad faith claim and its consequences. This is also a new feature which never existed before.
• The new law also provides guidance to the Management of the Authority on the use of funds appropriated by Parliament or from levies or any sum of money which the board may borrow. (See part x of the Act).
• Offences and Penalties as covered in Part xii of the Act. The new law is clearer on the issue of Penalties and Prosecution of offenders of the insurance industry. The Commissioner of Insurance is mandated to prosecute offenders of Insurance in a court of law upon receipt of consent from the Director of Public Prosecution (DPP) (See Section 164). Also the offenders have been given alternative to pay fine as will be prescribed by the Commissioner. If they refuse then they will face criminal charges in a court of law.
• The new Law also gives the Commissioner the right to issue a cease and desist order to the Insurance registrant where in the opinion of the Commissioner a person registered to conduct insurance business is conducting business in an unlawful or unethical manner. (See section 165 (i))
• Apart from imposing an overall duty of care of Directors and Officers to policyholders, the new law also provides for consultation before any changes to regulations are proposed to the government. Other features of the law are like a requirement for an insurer to establish audit and investment committees, placing of additional duties for auditors, definition of related party transactions and the requirement that actuarial valuation of a Non life fund shall be carried out after every two years.
In conclusion, it must be noted that changes that are effected in the insurance market of Tanzania with the operation of a new Insurance law are quite pertinent and are geared towards aligning the market insurance practice with best International practice as provided under core principles of the International Association of Insurance Supervisors (IAIS).
PRESENTATION MADE TO THE BOARD MEMBERS ON 26TH AUGUST 2009
By PAUL JOEL . NGWEMBE
DIRECTOR OF LEGAL SERVICES
Wednesday, June 23, 2010
What is Bancassurance and will it work in Tanzania?
Can Banks in Tanzania Benefit from Bancassurance?
Bancassurance in its simplest form is the distribution of insurance products through a bank's distribution channels. In concrete terms Bancassurance, describes a package of financial services that can fulfil both banking and insurance needs at the same time. It takes various forms in various countries depending upon the demography and economic and legislative climate of that country. Demographic profile of the country decides the kind of products Bancassurance shall be dealing in with, economic situation will determine the trend in terms of turnover, market share, etc., whereas the legislative climate will decide the borders within which the Bancassurance has to operate.
The motives behind Bancassurance also vary. For banks it is a means of product diversification and a source of additional fee income. Insurance companies see Bancassurance as a tool for increasing their market penetration and premium turnover. The customer sees Bancassurance as a bonanza in terms of reduced price, high quality product and delivery at their doorstep. Actually, everybody is a winner here.
Why should banks In Tanzania Enter the Insurance Market?
There are several reasons why banks in Tanzania should seriously consider Bancassurance, the most important of which is increased return on assets (ROA). One of the best ways to increase ROA, assuming you have a constant asset base, is through fee income. Banks that build fee incomes can cover more of their operating expenses, and one way to build fee income is through the sale of insurance products. The banks in Tanzania that can effectively cross-sell financial products can leverage their distribution and processing capabilities for profitable operating expense ratios. Leveraging their strengths and finding ways to overcome their weaknesses, therefore banks in Tanzania could change the face of insurance distribution. The sale of personal line insurance products through banks meets an important set of consumer needs. Most large retail banks prompt a great deal of trust in the public eye, which they can use in selling them personal line insurance products.
Another advantage open to banks in Tanzania over traditional insurance distributors is the lower cost per sales lead made possible by their sizable, loyal customer base. Banks also enjoy significant brand awareness within their sector, again providing a lower per-lead cost when advertising through print, radio and/or television. In Tanzania, banks that make the most of these advantages and penetrate their customer base and markets will be rewarded with an above-average market share.
Other bank strengths are their marketing and processing capabilities. Banks have extensive experience in marketing to both existing customers (for retention and cross selling) and non-customers (for acquisition and awareness). They also have access to multiple communications channels, such as statement inserts, direct mail, ATMs, telemarketing, etc. Banks' proficiency in using technology has resulted in improvements in transaction processing and customer service.
By successfully mining their customer databases, using their reputation and 'distribution systems’ (branch, phone, and mail) to make appointments, and utilizing 'sales techniques’ and products tailored to the Tanzanian market, banks can have more than doubled the conversion rates of insurance leads into sales and increase sales productivity to a ratio which is more than enough to make Bancassurance a highly profitable proposition for them.
Advantages for Insurers
Insurers have much to gain from marketing through banks. Insurance companies are finding it difficult to grow (in today’s turbulent economies) using the traditional systems because of such issues like price competition (driving down margins) and increased claims payment ratio (due to customers increased knowledge and reforms in the Insurance Act which have come into force recently). It as become harder over the last few years, to sell life related insurance and larger policies to Tanzanians. Middle-income consumers, who comprise the bulk of bank customers in Tanzania, get little attention from most life insurance companies; who seem to favour corporate companies. By capitalising on bank relationships, insurers will recapture much of this under served market.
Most insurers in Tanzania that have tried to penetrate middle-income markets through alternative channels such as direct marketing have not done well. Clearly, a change in approach is necessary. As with any initiative, success requires a clear understanding of what must be done, how it will be done and by whom. The place to begin is to look at the strengths that the banks and insurers together have, creating a ‘win win’ business opportunity.
Teamwork is the key
In their natural and traditional roles and with their current skills, neither banks nor insurance companies could effectively mount a Bancassurance start-up alone. Collaboration is the key to making this new channel work.
Banks bring a variety of capabilities to the table. Most obviously, they own proprietary databases that can be tapped for middle-market leads. In addition, they can use their name recognition and reputation at both local and regional levels. Strong players also excel at managing multiple distribution channels, cross-selling banking products, and using direct marketing. However, most banks in Tanzania lack experience in several areas critical to successful Bancassurance strategies: in particular, developing insurance products, selling through face-to-face "push" channels, underwriting, and managing complicated insurance products.
I would say that where banks usually fall short, a strong insurer will excel. Most have substantial products and underwriting experience, strong “push” channel capabilities, and investment management expertise. On the other hand, they tend to lack experience or ability in the areas where banks triumph. They have little or no background in managing low-cost distribution channels; they often lack local and regional name recognition and reputation; and they seldom possess access to or experience with the middle markets.
There Are Real Opportunities
Bank’s databases are is enormous even though the goodwill may not be the same as in case of their European counterparts. These databases have to be dissected variously and various homogeneous groups are to be churned out in order to position the Bancassurance products.
Other developing economies like Malaysia, Thailand and Singapore have already taken a leap in this direction and they are not doing badly. There is already an atmosphere created in the country for better insurance product liberalisation and there appears to be a political consensus also on the subject. Therefore, there is no hesitation in allowing the marriage of the two to take place. This can take the form of mergers or acquisitions or setting up a joint venture or creating a subsidiary by either party or just the working collaboration between banks and insurance companies.
Threats to Bancassurance
Success of a Bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. The Tanzanian work force at most level is so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will be resented with a passion.
Another possible threat may come from non-response from the target customers. Since banks and insurance companies have a major portion of their income coming from their investments, the return from Bancassurance must at least match those returns. Also if the alliance of major players is allowed to take place without proper supervision, there will be fierce competition in the market resulting in lower prices and the Bancassurance venture may never break-even.
Looking At the Figures
A study in USA a few years ago claimed that if banks made a major commitment to insurance and a more narrowly targeted commitment to investors, within 5 years they could increase retail revenues by nearly 50%. It further stated that:
• Banks could capture 10% to 15% of the total insurance and investment market by selling products to 20% of their existing customers.
• Banks' existing infrastructure enables them to operate at expense levels that are 30% to 50% lower than those of insurers.
• Bancassurance's bank-branch based sales system sells 3 to 5 times as many insurance policies as a conventional insurance sales and distribution force.
• By simplifying Bancassurance products each back office bank employee can easily manage policies compared to traditional insurers.
Lessons Banks in Tanzania Should Learn
We should take a leaf from the experienced players and develop Bancassurance only gradually. Like in France, Italy, Germany and Canada - banks were allowed first only to distribute the insurance products for a fee. This it self amounted to substantial income for banks since they were not carrying the risks and product development was also left to insurance companies. This seems fair since each player should contribute towards something in which he excels; banks in mass distribution and insurance companies in risk management. After stabilization, the roles may be expanded in opposite directions.
We need to develop innovative products and services. CIBC Bank in Canada relieves their customers of having to report and resolve motor claims. The bank assumes responsibility for the process, even phoning the police for the customer at the time of the accident. Another example is provided by Banco Bilbao Vizcaya of Spain who offers a life policy with simple premium payments and a clear contract that is designed to be sold, issued and signed at the point of sale within 15 minutes.
Banks and insurance companies in Tanzania wishing to pursue high insurance strategies would do well to learn from European bancassurers, who have decades of experience managing insurance subsidiaries. These banks have profitably sold insurance products to more than a fourth of their customers while generating more than 20% on sales. Credit Agricole is a large life insurer in France, and employs only less than 200 people in its insurance subsidiary. They are able to limit overhead by harnessing the bank's existing resources and capabilities thus making Bancassurance very lucrative and successful for them.
Obstacles and Success Factors
Even insurers and banks that seem ideally suited for a Bancassurance partnership can run into problems during implementation. The most common obstacles to success are poor manpower management, lack of a sales culture within the bank, no involvement by the branch managers, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy.
Conversely, Bancassurance ventures that succeed tend to have certain things in common. Factors that appear to be critical to success include strategies consistent with the bank's vision, knowledge of target customers' needs, defined sales process for introducing insurance services, simple yet complete product offerings, strong service delivery mechanism, quality administration, synchronized planning across all business lines and subsidiaries, complete integration of insurance with other bank products and services, extensive and high-quality training, sales management tracking system for reporting on agents' time and results of bank referrals and relevant and flexible database systems.
Bancassurance can be a Mechanism for Insurance Growth in the Tanzania
Existing low penetration of insurance together with high per capita income gives an unusually strong platform to launch and grow the industry into the future. Recent economic strides and infrastructural boom in Tanzania, can work as a catalyst and push the insurance industry to new horizons. Market opportunities for banks offering Bancassurance products are endless.
Conventional Bancassurance products like deposit insurance, unit linked products and investment cum protection products are likely to continue to be sold to its customer base. However, the asset creation process in most African countries through equity markets and infrastructural investments have created a new generation of High Net Worth Individuals (HNWIs) and banks would do well to take note of it. In addition, non-conventional products and commercial insurance products can also be sold to individuals and corporate companies through banks.
From the banker’s point of view, the potential lies in tapping not only the existing premium turnover in the market but also the likely increase in turnover due to the entry of banks in the insurance market.
Strategies for Entering the Market
Collaboration with an insurance company is the key; this could take multiple forms as below:
• Buying an insurance company out right
• Acquiring shares in an existing insurance company
• Cross share holding between the bank and insurance company
• Signing an exclusive agreement with one insurance company
• Signing a non-exclusive agreement with more than one insurance company
All the above have their own advantages and disadvantages for entering the market based on the market conditions and practicality. If a bank owns an insurance company which is not an established player in the market, starting Bancassurance with them alone is not an attractive proposition. However, if the insurance company has a strong standing and a reputation in the market, it makes sense to sign an exclusive agreement with them.
Self Integration of Insurance Activities
This actually means the development of insurance products in-house which may involve risk taking on the part of the banks. In fact, this is not a good idea as the job should be left to somebody who extensively knows that field. In the past, many European banks to this kind of strategy but most of them have discarded self integration of insurance after the losses they suffered. Banks can still get the benefit of such integration by properly coordinating with an insurance company and getting the products done or developed exclusively for them.
The Effective Bancassurance Model
Is the one which helps in pushing sales as well as satisfying customer needs and helping banks to become a ‘One stop shop’. As a Bancassurance model, if the bank is using a distribution agreement model, it should, go in for an exclusive agreement with an insurance company who is reputable in the industry. The reason being, while signing up with multiple insurers you end up looking like a broker who is not committed to a ‘brand’ or a ‘product’ or a particular level of ‘service’, which is vital if you want to grow in Bancassurance. By signing an exclusive agreement with an insurer, a bank can put their own stamp ‘Brand’ on the product without actually taking any risk. The bank will thus be identified with the product it is selling and will be able to convince the customer in a much better way. However, if the insurance market is not mature and there is lack of creativity and innovation, even non-exclusive agreements are workable.
Banks Can Use Bancassurance to Diversify
The Banking Industry in Tanzania has been growing at a very high rate. However, maintaining such a growth for a longer period is not sustainable since the market has to mature at one stage and economic conditions change (like the one the world is in now). Bancassurance, therefore comes as an additional source of revenue to help maintain the growth momentum. This can also be used to offset the declining deposits due to the low interest rates.
Benefits For Banks Attributed From Selling Insurance:
1) It adds to the portfolio of retail products already offered by a Bank.
2) It helps in bundling and packaging the existing core banking products like adding deposit life insurance on a pure term deposit product.
3) Balances the less performing products
4) It is a risk management device, since the fee increase earned on the sale of insurance can be used to offset the loss on account of bad loans.
5) It helps increase customer loyalty since they have more reason than just the banking to continue their relationship with the bank.
6) It helps banks to become a ‘one stop shop’ for all the financial needs of the customer’s whether it is banking insurance investments or estate planning.
It is a long journey before the Tanzanian insurance market reaches its mature stage in this cycle of evolution. The time now is to innovate and harness the potential of insurance that this country offers. The growth of our industries is poised to offer more opportunities as new technology and revitalised pools of human resources shall be looking to the insurance industry to provide protection. Banks are in a unique position to sell not only personal lines insurance products but also commercial insurance by using their relationship with their loyal customer base.
Bancassurance Creates what banks long for Fee Related Incomes
Banks are no longer required to be persuaded to sell or distribute insurance products to their customer base. In the seventies, when banks in select countries in Europe started implementing Bancassurance, the rest of the world contemplated probably for too long whether to join this phenomenon or not. Up to 90 percent of new life insurance premiums written in Western Europe today come through banks because of their early venture into Bancassurance.
Bank’s traditional sources of fee income have been the fixed charges levied on loans and over draft facilities, credit cards, merchant fee on point of sale transactions for debit and credit cards, letter of credits etc. This kind of revenue stream has been more or less steady over a period of time and growth has been fairly predictable. However the shrinking interest rates, growing competition and increased mobility of customers have forced bankers to look elsewhere to compensate for the declining profit margins and Bancassurance has come in handy for them.
Fee income from the distribution of insurance products has opened new horizons for the banks and they seem to be loving it. Product bundling in the retail space coupled with cross-selling of unit and investments linked with life insurance plans seem to be the order of the day in developed markets as far as Bancassurance revenue is concerned.
What Are the Opportunities Available
Opportunities and possibilities to earn fee income via the Bancassurance route are endless. Savings accounts, fixed deposits, loan accounts and credit cards are all goldmines as far as knowledge about customer’s preferences and financial status is concerned. Different insurance products can be tailored and targeted to specific segments based on the knowledge about customer’s spending patterns. The customers today are generally aware about the various insurance products available and most of them are already in need of some kind of protection whether it is car insurance, home insurance or a child education plan. All that is needed is to offer them a product which is tailored to fit their requirements and provides better value for the money.
The rule of thumb for a bank should be to cross-sell at least one insurance product to each of their customer base since every existing relationship is a potential source of additional income in terms of Bancassurance sales. It is much easier for the banks to sell insurance products, mainly asset and wealth management products, as they have complete knowledge about the financial status of the customers through their spending and saving patterns. In terms of efforts too, it is easier for the bank to approach and convince a customer to buy a particular insurance product since he trusts the banks more than his insurance company. The method of approaching the customer and the sales practice shall however depend upon the business model adopted by the bank and may vary substantially from one place to another.
Products And Insurer’s Interest In Europe
In terms of products, there are endless opportunities for the banks. Simple life insurance, endowment policies, annuities, education plans, depositors’ insurance and credit shield are the policies conventionally sold through the Bancassurance channels. Medical insurance, car insurance, home and contents insurance and travel insurance are also the products which are being distributed by the banks. However, quite a lot of innovations have taken place in the insurance market to provide more and more Bancassurance products to satisfy the increasing appetite of the banks for such products.
Insurers who are generally accused of being inflexible in the pricing and structuring of the products have been responding well to such challenges thrown open by the spread of Bancassurance. They are ready to innovate and experiment and have set up specialized Bancassurance units within their branches. Examples of some new and innovative Bancassurance products are income builder plan, critical illness cover, and return of premium products which are doing well in the European markets.
Corporate Bancassurance in Tanzania
Bancassurance provides more ways to earn fee income for the bank. As we discussed earlier that every relationship provides an opportunity to cross sell Bancassurance products whether it is retail or corporate. Corporate relationships provide an opportunity for corporate Bancassurance. All commercial enterprises need insurance for their buildings, factory or warehouses and banks can capitalize on this existing need for insurance cover. There is more fee income in distributing commercial property or liability insurance to corporate companies as their volumes and turnovers are high. It is easy to cross-sell commercial insurance at the time of providing business loans and providing Letters of Credit since it will be value addition from the customers’ point of view. Lending is an asset creation process for the bank and it makes sense even from the credit risk management perspective to have an insurance security of your choice.
Fire insurance, workers compensation insurance, group medical insurance and contractors’ insurance are just some of the commercial property and liability insurance which can be sold to the corporate customers of the banks thereby generating additional source of fee income. Similarly, Trade finance or operations division within the bank provide opportunity to cross-sell marine insurance. The importance of corporate Bancassurance lies in further cross-selling opportunity to the individuals within those companies.
Have You Heard Of Takaful Products
Takaful is the Shariah compliant Islamic version of traditional insurance products. The premise lies in mutual and cooperative way of managing the funds generated from the sales of Takaful products. The premium is called a ‘contribution’ and any profits after the claims and management expenses are returned to the policyholders who are treated as shareholders. The return of premium is termed as surplus distribution. Since its initiation nearly 20 years ago, Takaful products have caught the fancy of not only Muslim but also non-Muslims as Takaful treats its customers fairly.
Islamic banks distribute Takaful products and earn a fee income by tying up with several Takaful companies. Some of the Islamic Banks have formed Takaful as their subsidiary. The product ranges from life insurance, car insurance and health insurance to complex unit linked insurance products. Malaysia, Bahrain, Brunei and Saudi Arabia have been leading the Takaful revolution and the growth has been exceptional in these countries. United Arab Emirates, Pakistan and Qatar have also witnessed activities in this sector. What is interesting to note is that even purely commercial banks have entered this niche area by setting up dedicated Islamic banking division with Islamic insurance products as add on. Examples are HSBC Bank in UK with their Amanah range of products and Lloyds TSB Bank with their Islamic offerings including Life Insurance and Home Insurance based on Takaful principles. The call is to swim with the current as long as it takes you to the destination and the destination clearly is to increase fee based revenue.
Bancassurance in the Middle East
Banks in the Middle East are doing well in terms of generating fee income out of their Bancassurance activities. Lebanon leads the pack in terms of penetration. Every single Lebanese bank is tied up with an insurance company and every branch across the length and breadth of the country provides insurance services. Next in the lead is United Arab Emirates where large banks are now well-entrenched into Bancassurance activities. Not only insurance products are bundled or cross sold along with core retail banking products, direct marketing has also been employed to increase fee income based revenue. Sales Agents are increasingly being employed by the banks to concentrate more on Bancassurance activities.
Other countries in the region, e.g. Oman, Qatar, Bahrain, Kuwait and Saudi have not moved much in this direction mainly due to the taboo attached to the ‘Life Insurance’ and ambiguity of local regulation. Considering the economic boom in the Gulf region and large number of high net worth individuals (HNWIs), the potential for Bancassurance is tremendous and banks have the opportunity to cash on it.
Bancassurance Is Here To Stay and Opportunities Should Not Be Missed
A typical commercial bank has the potential of maximizing fee income from Bancassurance within and up to 50% of their total fee income from all sources combined. Fee Income from Bancassurance also reduces the overall customer acquisition cost from the bank’s point of view. Banks should capitalize on the opportunities thrown open by Bancassurance. Sales personnel should be recruited in masses and money spent on training them on product knowledge and selling techniques. At the end of the day, it is easy money for the banks and insurance related companies as there are virtually no risks and only gains. Customers will be happy and the shareholders of the banks will keep smiling.
Bancassurance in its simplest form is the distribution of insurance products through a bank's distribution channels. In concrete terms Bancassurance, describes a package of financial services that can fulfil both banking and insurance needs at the same time. It takes various forms in various countries depending upon the demography and economic and legislative climate of that country. Demographic profile of the country decides the kind of products Bancassurance shall be dealing in with, economic situation will determine the trend in terms of turnover, market share, etc., whereas the legislative climate will decide the borders within which the Bancassurance has to operate.
The motives behind Bancassurance also vary. For banks it is a means of product diversification and a source of additional fee income. Insurance companies see Bancassurance as a tool for increasing their market penetration and premium turnover. The customer sees Bancassurance as a bonanza in terms of reduced price, high quality product and delivery at their doorstep. Actually, everybody is a winner here.
Why should banks In Tanzania Enter the Insurance Market?
There are several reasons why banks in Tanzania should seriously consider Bancassurance, the most important of which is increased return on assets (ROA). One of the best ways to increase ROA, assuming you have a constant asset base, is through fee income. Banks that build fee incomes can cover more of their operating expenses, and one way to build fee income is through the sale of insurance products. The banks in Tanzania that can effectively cross-sell financial products can leverage their distribution and processing capabilities for profitable operating expense ratios. Leveraging their strengths and finding ways to overcome their weaknesses, therefore banks in Tanzania could change the face of insurance distribution. The sale of personal line insurance products through banks meets an important set of consumer needs. Most large retail banks prompt a great deal of trust in the public eye, which they can use in selling them personal line insurance products.
Another advantage open to banks in Tanzania over traditional insurance distributors is the lower cost per sales lead made possible by their sizable, loyal customer base. Banks also enjoy significant brand awareness within their sector, again providing a lower per-lead cost when advertising through print, radio and/or television. In Tanzania, banks that make the most of these advantages and penetrate their customer base and markets will be rewarded with an above-average market share.
Other bank strengths are their marketing and processing capabilities. Banks have extensive experience in marketing to both existing customers (for retention and cross selling) and non-customers (for acquisition and awareness). They also have access to multiple communications channels, such as statement inserts, direct mail, ATMs, telemarketing, etc. Banks' proficiency in using technology has resulted in improvements in transaction processing and customer service.
By successfully mining their customer databases, using their reputation and 'distribution systems’ (branch, phone, and mail) to make appointments, and utilizing 'sales techniques’ and products tailored to the Tanzanian market, banks can have more than doubled the conversion rates of insurance leads into sales and increase sales productivity to a ratio which is more than enough to make Bancassurance a highly profitable proposition for them.
Advantages for Insurers
Insurers have much to gain from marketing through banks. Insurance companies are finding it difficult to grow (in today’s turbulent economies) using the traditional systems because of such issues like price competition (driving down margins) and increased claims payment ratio (due to customers increased knowledge and reforms in the Insurance Act which have come into force recently). It as become harder over the last few years, to sell life related insurance and larger policies to Tanzanians. Middle-income consumers, who comprise the bulk of bank customers in Tanzania, get little attention from most life insurance companies; who seem to favour corporate companies. By capitalising on bank relationships, insurers will recapture much of this under served market.
Most insurers in Tanzania that have tried to penetrate middle-income markets through alternative channels such as direct marketing have not done well. Clearly, a change in approach is necessary. As with any initiative, success requires a clear understanding of what must be done, how it will be done and by whom. The place to begin is to look at the strengths that the banks and insurers together have, creating a ‘win win’ business opportunity.
Teamwork is the key
In their natural and traditional roles and with their current skills, neither banks nor insurance companies could effectively mount a Bancassurance start-up alone. Collaboration is the key to making this new channel work.
Banks bring a variety of capabilities to the table. Most obviously, they own proprietary databases that can be tapped for middle-market leads. In addition, they can use their name recognition and reputation at both local and regional levels. Strong players also excel at managing multiple distribution channels, cross-selling banking products, and using direct marketing. However, most banks in Tanzania lack experience in several areas critical to successful Bancassurance strategies: in particular, developing insurance products, selling through face-to-face "push" channels, underwriting, and managing complicated insurance products.
I would say that where banks usually fall short, a strong insurer will excel. Most have substantial products and underwriting experience, strong “push” channel capabilities, and investment management expertise. On the other hand, they tend to lack experience or ability in the areas where banks triumph. They have little or no background in managing low-cost distribution channels; they often lack local and regional name recognition and reputation; and they seldom possess access to or experience with the middle markets.
There Are Real Opportunities
Bank’s databases are is enormous even though the goodwill may not be the same as in case of their European counterparts. These databases have to be dissected variously and various homogeneous groups are to be churned out in order to position the Bancassurance products.
Other developing economies like Malaysia, Thailand and Singapore have already taken a leap in this direction and they are not doing badly. There is already an atmosphere created in the country for better insurance product liberalisation and there appears to be a political consensus also on the subject. Therefore, there is no hesitation in allowing the marriage of the two to take place. This can take the form of mergers or acquisitions or setting up a joint venture or creating a subsidiary by either party or just the working collaboration between banks and insurance companies.
Threats to Bancassurance
Success of a Bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. The Tanzanian work force at most level is so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will be resented with a passion.
Another possible threat may come from non-response from the target customers. Since banks and insurance companies have a major portion of their income coming from their investments, the return from Bancassurance must at least match those returns. Also if the alliance of major players is allowed to take place without proper supervision, there will be fierce competition in the market resulting in lower prices and the Bancassurance venture may never break-even.
Looking At the Figures
A study in USA a few years ago claimed that if banks made a major commitment to insurance and a more narrowly targeted commitment to investors, within 5 years they could increase retail revenues by nearly 50%. It further stated that:
• Banks could capture 10% to 15% of the total insurance and investment market by selling products to 20% of their existing customers.
• Banks' existing infrastructure enables them to operate at expense levels that are 30% to 50% lower than those of insurers.
• Bancassurance's bank-branch based sales system sells 3 to 5 times as many insurance policies as a conventional insurance sales and distribution force.
• By simplifying Bancassurance products each back office bank employee can easily manage policies compared to traditional insurers.
Lessons Banks in Tanzania Should Learn
We should take a leaf from the experienced players and develop Bancassurance only gradually. Like in France, Italy, Germany and Canada - banks were allowed first only to distribute the insurance products for a fee. This it self amounted to substantial income for banks since they were not carrying the risks and product development was also left to insurance companies. This seems fair since each player should contribute towards something in which he excels; banks in mass distribution and insurance companies in risk management. After stabilization, the roles may be expanded in opposite directions.
We need to develop innovative products and services. CIBC Bank in Canada relieves their customers of having to report and resolve motor claims. The bank assumes responsibility for the process, even phoning the police for the customer at the time of the accident. Another example is provided by Banco Bilbao Vizcaya of Spain who offers a life policy with simple premium payments and a clear contract that is designed to be sold, issued and signed at the point of sale within 15 minutes.
Banks and insurance companies in Tanzania wishing to pursue high insurance strategies would do well to learn from European bancassurers, who have decades of experience managing insurance subsidiaries. These banks have profitably sold insurance products to more than a fourth of their customers while generating more than 20% on sales. Credit Agricole is a large life insurer in France, and employs only less than 200 people in its insurance subsidiary. They are able to limit overhead by harnessing the bank's existing resources and capabilities thus making Bancassurance very lucrative and successful for them.
Obstacles and Success Factors
Even insurers and banks that seem ideally suited for a Bancassurance partnership can run into problems during implementation. The most common obstacles to success are poor manpower management, lack of a sales culture within the bank, no involvement by the branch managers, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy.
Conversely, Bancassurance ventures that succeed tend to have certain things in common. Factors that appear to be critical to success include strategies consistent with the bank's vision, knowledge of target customers' needs, defined sales process for introducing insurance services, simple yet complete product offerings, strong service delivery mechanism, quality administration, synchronized planning across all business lines and subsidiaries, complete integration of insurance with other bank products and services, extensive and high-quality training, sales management tracking system for reporting on agents' time and results of bank referrals and relevant and flexible database systems.
Bancassurance can be a Mechanism for Insurance Growth in the Tanzania
Existing low penetration of insurance together with high per capita income gives an unusually strong platform to launch and grow the industry into the future. Recent economic strides and infrastructural boom in Tanzania, can work as a catalyst and push the insurance industry to new horizons. Market opportunities for banks offering Bancassurance products are endless.
Conventional Bancassurance products like deposit insurance, unit linked products and investment cum protection products are likely to continue to be sold to its customer base. However, the asset creation process in most African countries through equity markets and infrastructural investments have created a new generation of High Net Worth Individuals (HNWIs) and banks would do well to take note of it. In addition, non-conventional products and commercial insurance products can also be sold to individuals and corporate companies through banks.
From the banker’s point of view, the potential lies in tapping not only the existing premium turnover in the market but also the likely increase in turnover due to the entry of banks in the insurance market.
Strategies for Entering the Market
Collaboration with an insurance company is the key; this could take multiple forms as below:
• Buying an insurance company out right
• Acquiring shares in an existing insurance company
• Cross share holding between the bank and insurance company
• Signing an exclusive agreement with one insurance company
• Signing a non-exclusive agreement with more than one insurance company
All the above have their own advantages and disadvantages for entering the market based on the market conditions and practicality. If a bank owns an insurance company which is not an established player in the market, starting Bancassurance with them alone is not an attractive proposition. However, if the insurance company has a strong standing and a reputation in the market, it makes sense to sign an exclusive agreement with them.
Self Integration of Insurance Activities
This actually means the development of insurance products in-house which may involve risk taking on the part of the banks. In fact, this is not a good idea as the job should be left to somebody who extensively knows that field. In the past, many European banks to this kind of strategy but most of them have discarded self integration of insurance after the losses they suffered. Banks can still get the benefit of such integration by properly coordinating with an insurance company and getting the products done or developed exclusively for them.
The Effective Bancassurance Model
Is the one which helps in pushing sales as well as satisfying customer needs and helping banks to become a ‘One stop shop’. As a Bancassurance model, if the bank is using a distribution agreement model, it should, go in for an exclusive agreement with an insurance company who is reputable in the industry. The reason being, while signing up with multiple insurers you end up looking like a broker who is not committed to a ‘brand’ or a ‘product’ or a particular level of ‘service’, which is vital if you want to grow in Bancassurance. By signing an exclusive agreement with an insurer, a bank can put their own stamp ‘Brand’ on the product without actually taking any risk. The bank will thus be identified with the product it is selling and will be able to convince the customer in a much better way. However, if the insurance market is not mature and there is lack of creativity and innovation, even non-exclusive agreements are workable.
Banks Can Use Bancassurance to Diversify
The Banking Industry in Tanzania has been growing at a very high rate. However, maintaining such a growth for a longer period is not sustainable since the market has to mature at one stage and economic conditions change (like the one the world is in now). Bancassurance, therefore comes as an additional source of revenue to help maintain the growth momentum. This can also be used to offset the declining deposits due to the low interest rates.
Benefits For Banks Attributed From Selling Insurance:
1) It adds to the portfolio of retail products already offered by a Bank.
2) It helps in bundling and packaging the existing core banking products like adding deposit life insurance on a pure term deposit product.
3) Balances the less performing products
4) It is a risk management device, since the fee increase earned on the sale of insurance can be used to offset the loss on account of bad loans.
5) It helps increase customer loyalty since they have more reason than just the banking to continue their relationship with the bank.
6) It helps banks to become a ‘one stop shop’ for all the financial needs of the customer’s whether it is banking insurance investments or estate planning.
It is a long journey before the Tanzanian insurance market reaches its mature stage in this cycle of evolution. The time now is to innovate and harness the potential of insurance that this country offers. The growth of our industries is poised to offer more opportunities as new technology and revitalised pools of human resources shall be looking to the insurance industry to provide protection. Banks are in a unique position to sell not only personal lines insurance products but also commercial insurance by using their relationship with their loyal customer base.
Bancassurance Creates what banks long for Fee Related Incomes
Banks are no longer required to be persuaded to sell or distribute insurance products to their customer base. In the seventies, when banks in select countries in Europe started implementing Bancassurance, the rest of the world contemplated probably for too long whether to join this phenomenon or not. Up to 90 percent of new life insurance premiums written in Western Europe today come through banks because of their early venture into Bancassurance.
Bank’s traditional sources of fee income have been the fixed charges levied on loans and over draft facilities, credit cards, merchant fee on point of sale transactions for debit and credit cards, letter of credits etc. This kind of revenue stream has been more or less steady over a period of time and growth has been fairly predictable. However the shrinking interest rates, growing competition and increased mobility of customers have forced bankers to look elsewhere to compensate for the declining profit margins and Bancassurance has come in handy for them.
Fee income from the distribution of insurance products has opened new horizons for the banks and they seem to be loving it. Product bundling in the retail space coupled with cross-selling of unit and investments linked with life insurance plans seem to be the order of the day in developed markets as far as Bancassurance revenue is concerned.
What Are the Opportunities Available
Opportunities and possibilities to earn fee income via the Bancassurance route are endless. Savings accounts, fixed deposits, loan accounts and credit cards are all goldmines as far as knowledge about customer’s preferences and financial status is concerned. Different insurance products can be tailored and targeted to specific segments based on the knowledge about customer’s spending patterns. The customers today are generally aware about the various insurance products available and most of them are already in need of some kind of protection whether it is car insurance, home insurance or a child education plan. All that is needed is to offer them a product which is tailored to fit their requirements and provides better value for the money.
The rule of thumb for a bank should be to cross-sell at least one insurance product to each of their customer base since every existing relationship is a potential source of additional income in terms of Bancassurance sales. It is much easier for the banks to sell insurance products, mainly asset and wealth management products, as they have complete knowledge about the financial status of the customers through their spending and saving patterns. In terms of efforts too, it is easier for the bank to approach and convince a customer to buy a particular insurance product since he trusts the banks more than his insurance company. The method of approaching the customer and the sales practice shall however depend upon the business model adopted by the bank and may vary substantially from one place to another.
Products And Insurer’s Interest In Europe
In terms of products, there are endless opportunities for the banks. Simple life insurance, endowment policies, annuities, education plans, depositors’ insurance and credit shield are the policies conventionally sold through the Bancassurance channels. Medical insurance, car insurance, home and contents insurance and travel insurance are also the products which are being distributed by the banks. However, quite a lot of innovations have taken place in the insurance market to provide more and more Bancassurance products to satisfy the increasing appetite of the banks for such products.
Insurers who are generally accused of being inflexible in the pricing and structuring of the products have been responding well to such challenges thrown open by the spread of Bancassurance. They are ready to innovate and experiment and have set up specialized Bancassurance units within their branches. Examples of some new and innovative Bancassurance products are income builder plan, critical illness cover, and return of premium products which are doing well in the European markets.
Corporate Bancassurance in Tanzania
Bancassurance provides more ways to earn fee income for the bank. As we discussed earlier that every relationship provides an opportunity to cross sell Bancassurance products whether it is retail or corporate. Corporate relationships provide an opportunity for corporate Bancassurance. All commercial enterprises need insurance for their buildings, factory or warehouses and banks can capitalize on this existing need for insurance cover. There is more fee income in distributing commercial property or liability insurance to corporate companies as their volumes and turnovers are high. It is easy to cross-sell commercial insurance at the time of providing business loans and providing Letters of Credit since it will be value addition from the customers’ point of view. Lending is an asset creation process for the bank and it makes sense even from the credit risk management perspective to have an insurance security of your choice.
Fire insurance, workers compensation insurance, group medical insurance and contractors’ insurance are just some of the commercial property and liability insurance which can be sold to the corporate customers of the banks thereby generating additional source of fee income. Similarly, Trade finance or operations division within the bank provide opportunity to cross-sell marine insurance. The importance of corporate Bancassurance lies in further cross-selling opportunity to the individuals within those companies.
Have You Heard Of Takaful Products
Takaful is the Shariah compliant Islamic version of traditional insurance products. The premise lies in mutual and cooperative way of managing the funds generated from the sales of Takaful products. The premium is called a ‘contribution’ and any profits after the claims and management expenses are returned to the policyholders who are treated as shareholders. The return of premium is termed as surplus distribution. Since its initiation nearly 20 years ago, Takaful products have caught the fancy of not only Muslim but also non-Muslims as Takaful treats its customers fairly.
Islamic banks distribute Takaful products and earn a fee income by tying up with several Takaful companies. Some of the Islamic Banks have formed Takaful as their subsidiary. The product ranges from life insurance, car insurance and health insurance to complex unit linked insurance products. Malaysia, Bahrain, Brunei and Saudi Arabia have been leading the Takaful revolution and the growth has been exceptional in these countries. United Arab Emirates, Pakistan and Qatar have also witnessed activities in this sector. What is interesting to note is that even purely commercial banks have entered this niche area by setting up dedicated Islamic banking division with Islamic insurance products as add on. Examples are HSBC Bank in UK with their Amanah range of products and Lloyds TSB Bank with their Islamic offerings including Life Insurance and Home Insurance based on Takaful principles. The call is to swim with the current as long as it takes you to the destination and the destination clearly is to increase fee based revenue.
Bancassurance in the Middle East
Banks in the Middle East are doing well in terms of generating fee income out of their Bancassurance activities. Lebanon leads the pack in terms of penetration. Every single Lebanese bank is tied up with an insurance company and every branch across the length and breadth of the country provides insurance services. Next in the lead is United Arab Emirates where large banks are now well-entrenched into Bancassurance activities. Not only insurance products are bundled or cross sold along with core retail banking products, direct marketing has also been employed to increase fee income based revenue. Sales Agents are increasingly being employed by the banks to concentrate more on Bancassurance activities.
Other countries in the region, e.g. Oman, Qatar, Bahrain, Kuwait and Saudi have not moved much in this direction mainly due to the taboo attached to the ‘Life Insurance’ and ambiguity of local regulation. Considering the economic boom in the Gulf region and large number of high net worth individuals (HNWIs), the potential for Bancassurance is tremendous and banks have the opportunity to cash on it.
Bancassurance Is Here To Stay and Opportunities Should Not Be Missed
A typical commercial bank has the potential of maximizing fee income from Bancassurance within and up to 50% of their total fee income from all sources combined. Fee Income from Bancassurance also reduces the overall customer acquisition cost from the bank’s point of view. Banks should capitalize on the opportunities thrown open by Bancassurance. Sales personnel should be recruited in masses and money spent on training them on product knowledge and selling techniques. At the end of the day, it is easy money for the banks and insurance related companies as there are virtually no risks and only gains. Customers will be happy and the shareholders of the banks will keep smiling.
Free Insurance Assessment by Insure Master Tanzania
Take advantage of an Insurance Assessment by a professional Insurance Consultant with over 4 years industry experience in the UK and Tanzanian Insurance Markets.
We carry out the assessment on the insurance policies, which are in place for your company.
An Insurance Assessment Consists of the Following:
• Acquiring the types of insurance policies currently held by your company and explaining each one to you.
• Getting the corresponding sums insured per policy.
• Evaluating the relevance of the policies held by your company against the companies’ functions/productions.
• Assessing if there is possible over or under insurance and explaining the resulting outcome should claims arise.
• Advising competitive policies, which could reduce insurance premiums for your company and/or increase the level of covers, which is to be enjoyed.
• Suggesting a new insurance scheme and providing quotes to show the expected premiums. (No obligation to accept the quote or scheme)
• Analysing of your companies’ current insurance details and researching the market to see where you can obtain better premium rates. (Only reputable insurance companies are approached)
Within Tanzania there are some policies which a company must have because it is a legal requirement such as: workers’ compensation, professional indemnity, motor third party bodily injury to name a few. I can help to advice your company if it is adhering to the legal requirement.
There are various insurance policies on the market which include: Fire, Buildings Combined, Office Contents, Business Interruption, Theft, Money, Glass, Fidelity (Fraud by employees), Goods in Transit, Business all Risks, Accidental Damage, Public Liability, Erection all Risk, Contractors all Risk, Employers Liability, Group Personal Accident, Personal accident, Motor, Electronic all Risk, Machinery Breakdown, Medical insurance and schemes, etc. You can therefore see that it can get very confusing when looking at insurance options for your company.
This is why Insure Master Tanzania (IMT) can take away all the stress, so you have peace of mind knowing you’re comprehensively insured. I will do the research into historical events within your industry looking at claim trends. Thus seeing where you’re most vulnerable, to insure that you have the best possible insurance protection.
Please contact me
"PROFESSIONAL ADVICE WITH A SMILE SO YOU DON’T HAVE SLEEPLESS NIGHTS"
We carry out the assessment on the insurance policies, which are in place for your company.
An Insurance Assessment Consists of the Following:
• Acquiring the types of insurance policies currently held by your company and explaining each one to you.
• Getting the corresponding sums insured per policy.
• Evaluating the relevance of the policies held by your company against the companies’ functions/productions.
• Assessing if there is possible over or under insurance and explaining the resulting outcome should claims arise.
• Advising competitive policies, which could reduce insurance premiums for your company and/or increase the level of covers, which is to be enjoyed.
• Suggesting a new insurance scheme and providing quotes to show the expected premiums. (No obligation to accept the quote or scheme)
• Analysing of your companies’ current insurance details and researching the market to see where you can obtain better premium rates. (Only reputable insurance companies are approached)
Within Tanzania there are some policies which a company must have because it is a legal requirement such as: workers’ compensation, professional indemnity, motor third party bodily injury to name a few. I can help to advice your company if it is adhering to the legal requirement.
There are various insurance policies on the market which include: Fire, Buildings Combined, Office Contents, Business Interruption, Theft, Money, Glass, Fidelity (Fraud by employees), Goods in Transit, Business all Risks, Accidental Damage, Public Liability, Erection all Risk, Contractors all Risk, Employers Liability, Group Personal Accident, Personal accident, Motor, Electronic all Risk, Machinery Breakdown, Medical insurance and schemes, etc. You can therefore see that it can get very confusing when looking at insurance options for your company.
This is why Insure Master Tanzania (IMT) can take away all the stress, so you have peace of mind knowing you’re comprehensively insured. I will do the research into historical events within your industry looking at claim trends. Thus seeing where you’re most vulnerable, to insure that you have the best possible insurance protection.
Please contact me
"PROFESSIONAL ADVICE WITH A SMILE SO YOU DON’T HAVE SLEEPLESS NIGHTS"
Why is Health Insurance a Taboo?
Time to get real and talk about insurance which touches all of us in a personal manner, I remember when I was young you had to be rich to have a privilege of health or life insurance. This is not the case anymore because with the evolution of time and the insurance industry in Tanzania we are spoilt for choice and there is something for everyone’s budget.
The problem I have with health insurance in Tanzania is the insensitive way it is marketed and sold and that the people who are on the front line from the insurer’s point of view don’t see the importance of being informative. My background in insurance started in health so I know how things should work. There are a few leading companies in this sector but in my eyes the level of cover against the premiums people have to pay is an unbalanced ratio (which is being corrected).
The days when people paid whatever was asked from them for health insurance are long gone, and now people are asking more questions like the level of cover in respect to the limits and exclusions on the policy. We should all ask and investigate what we are getting for our money especially in Health Insurance, because taking the wrong product can mean the difference between life and death. Most companies are now using health insurance as an added incentive to get employees to join them, this is good but you should always break down and digest the policy offered because you may find out that it’s not worth the paper it’s written on.
Having talked to many people most are aware of ARR, Strategis, and Jubilee for health insurance and Alliance and African life for life insurance; but there is another company which is causing huge ripples in the lake which is was called GoodHealth and is now called Aetna Global Benefits. So this area of insurance is fast becoming very competitive which should work in our favor, only problem is very little is known about the policies and most of the time the jargon and terminology used can be very disheartening.
So here are a few tips to make sure you get the right policy for you and your family.
JACOBS USEFUL HINTS:
What is the difference between Day-patient treatment and In-patient treatment? In terms of health insurance policies there is no real difference except the length of time you are admitted to a hospital for treatment. Some health insurance policies cover only for treatment which involves admission to a hospital and others only cover for treatment with no admission required (Out-patient treatment). Thus for treatment requiring an admission it must be medically necessary for you to be admitted to a hospital bed and not dependent on whether or not you need an over night stay.
Out-patient treatment is simply when you receive treatment at a hospital, but you are not admitted to a hospital bed.
Some policies require a pre-authorisation of treatment before you under go anything. If this is the case then you will need to contact you health insurance provider and give them all the details of the treatment you will be having, for them to give you the go ahead or decline your treatment due to the level of your policy. Typical cases where pre-authorisation is required are Planned in-patient or day-patient treatment, Pregnancy or childbirth treatment, Planned surgery, Evacuation, Second medical opinions, Psychiatric treatment, Home nursing charges, Planned MRI and CT scans just to name a few.
On some health insurance policies a primary referral is required from a general doctor to a specialist and what we term self referral is not covered (going to a specialist direct). Always check before heading to see a specialist just because you have a health insurance policy because you may find a nasty surprise waiting for you.
Check what is classified as a pre-existing condition, because you may not be covered for some things which you have suffered from in the past or you are currently suffering from.
Like all insurance policies an excess may apply. An excess is the amount that you will have to pay in respect of your treatment and any amount remaining there after will be payable by the insurer.
JACOBS TIPS:
Affordability. What can you afford to spend on health insurance? Granted, it is a necessity in today’s society, but there are limits to what we can afford. Be realistic, you don’t want to lose your insurance policy because you can’t afford to make a few premiums.
See what’s available. You may have an option to purchase health insurance through your employer or your employer may offset some of the costs of a policy. This may be a more affordable option, but be sure to see what the limitations of these policies are. Less expensive is not always the best way to determine if the cover is the right one.
Compare and Consider. There are several types of health insurance policies available to choose from. Carefully compare the pros and cons of each policy, and consider which will be more beneficial to you and your family.
Shop around. Get quotes from various insurance companies in order to make the best decision. By comparing various companies, you may save some money and also find greater benefits. Be sure that you are comparing similar types of policies, because prices and coverage of different plans will vary.
Kinds of policy. What are your needs? Are you planning on starting a family, and therefore in need of both maternity and child coverage? Would you like your office and/or hospital visits included in your coverage? Do you need coverage for prescriptions? Be sure to consider your current and future needs when looking for health insurance.
Hospitals. Another thing to consider when looking for health insurance is which hospitals are part of your provider network. Where is the nearest included hospital located? These are major considerations when choosing insurance coverage.
Pre-existing Conditions. What are the limitations on pre-existing conditions, if any? Be familiar with the limitations your policy. There are many insurance plans that place restrictions on accepting clients with pre-existing conditions, including waiting periods before coverage begins. If you have a pre-existing condition there may be other options for you.
Take your time. Don’t feel pressured to make an instant decision because you need a policy and don’t let anyone pressure you into buying the wrong type of policy for you. You don’t want to sign and pay for something that is essentially useless for you.
Read before signing. Be sure to carefully read the contract of the policy, and don’t be afraid or ashamed to have someone explain it to you. This is an important decision, and you need to know that it will provide the benefits to cover your needs.
The problem I have with health insurance in Tanzania is the insensitive way it is marketed and sold and that the people who are on the front line from the insurer’s point of view don’t see the importance of being informative. My background in insurance started in health so I know how things should work. There are a few leading companies in this sector but in my eyes the level of cover against the premiums people have to pay is an unbalanced ratio (which is being corrected).
The days when people paid whatever was asked from them for health insurance are long gone, and now people are asking more questions like the level of cover in respect to the limits and exclusions on the policy. We should all ask and investigate what we are getting for our money especially in Health Insurance, because taking the wrong product can mean the difference between life and death. Most companies are now using health insurance as an added incentive to get employees to join them, this is good but you should always break down and digest the policy offered because you may find out that it’s not worth the paper it’s written on.
Having talked to many people most are aware of ARR, Strategis, and Jubilee for health insurance and Alliance and African life for life insurance; but there is another company which is causing huge ripples in the lake which is was called GoodHealth and is now called Aetna Global Benefits. So this area of insurance is fast becoming very competitive which should work in our favor, only problem is very little is known about the policies and most of the time the jargon and terminology used can be very disheartening.
So here are a few tips to make sure you get the right policy for you and your family.
JACOBS USEFUL HINTS:
What is the difference between Day-patient treatment and In-patient treatment? In terms of health insurance policies there is no real difference except the length of time you are admitted to a hospital for treatment. Some health insurance policies cover only for treatment which involves admission to a hospital and others only cover for treatment with no admission required (Out-patient treatment). Thus for treatment requiring an admission it must be medically necessary for you to be admitted to a hospital bed and not dependent on whether or not you need an over night stay.
Out-patient treatment is simply when you receive treatment at a hospital, but you are not admitted to a hospital bed.
Some policies require a pre-authorisation of treatment before you under go anything. If this is the case then you will need to contact you health insurance provider and give them all the details of the treatment you will be having, for them to give you the go ahead or decline your treatment due to the level of your policy. Typical cases where pre-authorisation is required are Planned in-patient or day-patient treatment, Pregnancy or childbirth treatment, Planned surgery, Evacuation, Second medical opinions, Psychiatric treatment, Home nursing charges, Planned MRI and CT scans just to name a few.
On some health insurance policies a primary referral is required from a general doctor to a specialist and what we term self referral is not covered (going to a specialist direct). Always check before heading to see a specialist just because you have a health insurance policy because you may find a nasty surprise waiting for you.
Check what is classified as a pre-existing condition, because you may not be covered for some things which you have suffered from in the past or you are currently suffering from.
Like all insurance policies an excess may apply. An excess is the amount that you will have to pay in respect of your treatment and any amount remaining there after will be payable by the insurer.
JACOBS TIPS:
Affordability. What can you afford to spend on health insurance? Granted, it is a necessity in today’s society, but there are limits to what we can afford. Be realistic, you don’t want to lose your insurance policy because you can’t afford to make a few premiums.
See what’s available. You may have an option to purchase health insurance through your employer or your employer may offset some of the costs of a policy. This may be a more affordable option, but be sure to see what the limitations of these policies are. Less expensive is not always the best way to determine if the cover is the right one.
Compare and Consider. There are several types of health insurance policies available to choose from. Carefully compare the pros and cons of each policy, and consider which will be more beneficial to you and your family.
Shop around. Get quotes from various insurance companies in order to make the best decision. By comparing various companies, you may save some money and also find greater benefits. Be sure that you are comparing similar types of policies, because prices and coverage of different plans will vary.
Kinds of policy. What are your needs? Are you planning on starting a family, and therefore in need of both maternity and child coverage? Would you like your office and/or hospital visits included in your coverage? Do you need coverage for prescriptions? Be sure to consider your current and future needs when looking for health insurance.
Hospitals. Another thing to consider when looking for health insurance is which hospitals are part of your provider network. Where is the nearest included hospital located? These are major considerations when choosing insurance coverage.
Pre-existing Conditions. What are the limitations on pre-existing conditions, if any? Be familiar with the limitations your policy. There are many insurance plans that place restrictions on accepting clients with pre-existing conditions, including waiting periods before coverage begins. If you have a pre-existing condition there may be other options for you.
Take your time. Don’t feel pressured to make an instant decision because you need a policy and don’t let anyone pressure you into buying the wrong type of policy for you. You don’t want to sign and pay for something that is essentially useless for you.
Read before signing. Be sure to carefully read the contract of the policy, and don’t be afraid or ashamed to have someone explain it to you. This is an important decision, and you need to know that it will provide the benefits to cover your needs.
Being Successful When Claiming
You have gone to your agent, broker or insurance company to claim, only to find out that you have opened a huge can of worms. Let’s see how we can understand the process and procedures of claiming.
Where does my premium money go?
This is the question most people ask when they make a claim and it is not honoured. The money you pay on your motor insurance policy is not merely set aside in case you need it; instead it is put into one big pot. Here’s a typical breakdown of where the money from your premium goes:
• 50% to pay claims.
• 25% on legal and administrative costs.
• 25% for costs of running the company.
These numbers vary between insurers. Some are better than others at saving and on cutting their overheads. Most of the money paid out on car insurance claims is paid on property damage claims. Insurance companies also spend money on commission payments which further increase the costs of running an insurance company.
Overview of Claiming
Each agent/broker/insurer has got their own procedures on how claims are dealt with and what is required from you at what time. There are documents you must obtain and present to your agent/broker/insurer, along with a fully completed claim form. Your claim will be logged and an insurance assessor/loss adjuster will be appointed.
On average a claim which is not complicated should take up to 2 weeks to be settled by an insurance company (from the date which you handed in the required documents). We must remember that most large claims require an assessor/loss adjuster. Who will view your vehicle and compare the damages to the repair estimate, thus presenting a report with their recommendations to your insurer. This report plays the basis to what the insurance company will pay up to or even if they are going to settle your claim at all. When all the documents and the assessors/loss adjusters report have been presented to the insurer, you should receive a letter (repair authorisation) within 3 working days.
Delays can occur in settling your claim because of negotiations between your insurers and the garage where the repairs are going to take place (garages tend to inflate their repair estimates, when they know that an insurance company is going to be paying the bill). People tend to get frustrated with such delays. Think of it this way, would you pay someone to repair your vehicle without negotiating the price first? I think not. It’s the same for an insurance company; they have to make sure that they too are not being ripped off. Otherwise if they paid repair estimates without a care in the world, they could find themselves in trouble by running out of money to pay claims.
Remember you’re not the only one claiming and therefore sometimes a gentle reminder to your agent/broker/insurer may be required. If you feel that things are taking too long and you have not been informed of your claims progress, I would suggest writing an email to your contact person giving them a deadline to advise you what the claim status is; if you still don’t get a response then follow up by contacting someone in higher management. If this fails you can report your situation to the Insurance Supervisory Department.
The new law, Insurance Act 2009, was passed in April 2009 by Parliament and will benefit us all. The new law forces insurers to pay eligible claims within 45 days of the reported accident. This law allows the Commissioner of Insurance to make sure you get your settlement quickly. The Commissioner has been given the power to fine insurers who do not adhere to this new law not more than 5,000,000/- tshs on top of the claim amount.
Claims Handling
To enable your claim to be dealt with quickly and efficiently, it is very important that you notify your agent/broker/insurer of the loss or any occurrence that may give rise to a claim immediately. You can do this by telephone, email, letter or you may visit their office. After notification they will do the following:
• Notify your insurers immediately (if you have gone through an agent or broker).
• Give you a claim form to complete.
• Advise you of the documents required and verify them to ensure their validity in relation to the claim in question.
• Advise you on each stage as the claim progresses.
• Prepare and send you a claims’ update.
Some small but very important things you must note or comply with to avoid problems in motor claims should they arise.
• Make sure that you have fully paid your premium.
• Ensure that you have fitted your vehicle with the recommended Anti Theft Device. This is a must to avoid paying higher excess.
• Ensure your vehicle is at all times roadworthy. Worn out tyres should never be used even as spares. Your policy contains a maintenance warranty and if your vehicle is not properly maintained the insurers may not honour your claim.
• Declare the values if you have fitted your vehicle with non-standard items like Alloy rims, special tyres, mini TVs, etc. This will enable your insurer to charge any additional premium so that your claim will be paid without problems.
• Your windscreen claim will not be subject to payment of excess should the damage also involve other parts of your vehicle. However if it is damaged on its own then the excess will apply. A photograph of the damaged windscreen is a requirement. Please take one before you carry out repairs.
• Ensure your vehicle is adequately insured. Avoid over insurance as you will only pay extra premium unnecessarily. Also avoid under insurance to avoid the average clause condition which states that you will be responsible for the proportion of loss arising from under insurance, meaning you will be liable to pay part of the loss.
• You should never insure your vehicle tax free as this will constitute underinsurance. Please note that should a claim occur the vehicle will be repaired with parts that are subject to tax which is unfair to the insurers.
• Never allow your vehicle to be driven by unauthorized or by unlicensed drivers.
• Note that you will be asked to meet any costs arising from betterment of your vehicle should a claim arise. If your vehicle is partly damaged at the front but requires full repainting you will be expected to chip in for the subsequent charges proportionately.
• Never use your private vehicle to ferry passengers like “daladala’s” or “taxi bubu’s”. Any claim arising from an accident will not be processed by your insurer.
• Report all incidents immediately, especially if there are any injuries to passengers or third parties. The same should be reported to police and a report obtained.
After an accident please do the following (in no particular order);
• Make sure everyone is ok and does not need medical help.
• Move safely away from your vehicle and put hazard signs on the road to warn other drivers.
• Take pictures of the accident and both vehicles even by using a camera phone.
• At an appropriate time contact your insurance company to let them know about the accident, make sure the other person contacts their insurance company too.
• Talk to the other person involved in the accident and get their insurance and contact details.
• Take all details; location and cause of the accident, time, weather conditions, type of road surface, warning given, lights showing on the vehicle and the estimated speed before the accident. (you will need to fill a claim form which will ask for this information, so to avoid forgetting anything make a note)
• If possible obtain witnesses.
• Never ever admit liability.
• Notify Police immediately (A must for all cases especially injury claims).
• After the Police have recorded the accident, move your vehicle to a safe place.
• If you can’t go to the nearest police station then give a full statement of what happened there, and get the contact details of the police officer including their police identification number.
• Enquire when you can follow up about the police documents which you will need to present to your agent/broker/insurer.
• Obtain a Police accident report and vehicle inspection report.
• Obtain an estimate of the repair cost from a garage.
• Complete a claim form. Please fill all the details required, and consult with your agent/broker/insurer if you need help.
• Submit all third party correspondence received answered or acknowledged to your agent/broker/insurer.
• A copy of driver’s license and insurance cover note is required by your agent/broker/insurer.
• A copy of the vehicle registration card or other proof of vehicle ownership is required.
• If your vehicle is impounded by the police you will need, the original insurance cover note and the original agents/brokers/insurers receipt for proof of payment. So they can release your vehicle.
In case of theft of your vehicle (in no particular order):
• Notify Police and your agent/broker/insurer immediately.
• Obtain a Police report.
• Cooperate with your agent/broker/insurer/police.
• Produce the original registration card of the vehicle.
• If your vehicle is stolen and not recovered, your agent/broker/insurer will require an original log book (if you have one), car keys (full set), copy of driver’s license, and original certificate of insurance (cover note).
• Applicable excess is payable before the release of a settlement.
JACOB’S TIPS:
Claiming is a stressful job, because your emotions are all over the place. If you have taken your insurance directly then you will have to negotiate for yourself; if you went through an agent or broker then they will do the negotiating on your behalf. Having said this, if things move at a slow pace don’t just sit back and wait, contact your agent or broker to see what is happening. Insurance is a customer service industry; therefore it’s your right to get the best service from your insurance provider. My motto is “no action, then show them your reaction”.
If you are the victim of an accident and want to claim from the other persons insurance, make sure the other person notifies their agent/broker/insurer. You will not be able to claim from them if their insurer has not been notified. This is because their insurer will have no records of the accident and will not want to take your word against their clients. To avoid this make sure that you and the other person at fault inform your respective agents/brokers/insurers and give each others numbers to them too in case they need to follow up.
The aim of motor insurance policies is to have your vehicle restored to as near a condition as the one it was in before the accident. Based on this principle, for a relatively new vehicle, damaged items will usually be replaced with new parts. However, for vehicles more than three years old (number of years can differ from company to company), the insurance company may want your vehicle to be repaired with good-quality reconditioned parts. When purchasing a motor insurance policy, you should ask the agent/broker/insurer to explain to you their replacement policy (i.e. whether your vehicle will be repaired with new or used parts). Your agent/broker/insurer should disclose to you any restrictions on repairs before you buy the policy.
Both you and your agent/broker/insurer have the right to cancel the insurance policy for any reason within a written period. Insurance companies can decide not to renew a policy after a major accident claim; these are business decisions of the insurance company. If your agent/broker/insurer cancels the policy, they will refund you the unused proportion of the premium. Some companies refund the premium on a pro-rata basis with the deduction of a small administration fee. Others use a method that calculates what would have been charged if your policy were a short-term policy. This usually applies if the cancellation is at your request. You should check with your agent/broker/insurer how it calculates policy refunds. Note that refunds may be subject to a minimum amount, and that your agent/broker/insurer may reserve the right not to refund any premium if a successful claim has been made on the policy.
Where does my premium money go?
This is the question most people ask when they make a claim and it is not honoured. The money you pay on your motor insurance policy is not merely set aside in case you need it; instead it is put into one big pot. Here’s a typical breakdown of where the money from your premium goes:
• 50% to pay claims.
• 25% on legal and administrative costs.
• 25% for costs of running the company.
These numbers vary between insurers. Some are better than others at saving and on cutting their overheads. Most of the money paid out on car insurance claims is paid on property damage claims. Insurance companies also spend money on commission payments which further increase the costs of running an insurance company.
Overview of Claiming
Each agent/broker/insurer has got their own procedures on how claims are dealt with and what is required from you at what time. There are documents you must obtain and present to your agent/broker/insurer, along with a fully completed claim form. Your claim will be logged and an insurance assessor/loss adjuster will be appointed.
On average a claim which is not complicated should take up to 2 weeks to be settled by an insurance company (from the date which you handed in the required documents). We must remember that most large claims require an assessor/loss adjuster. Who will view your vehicle and compare the damages to the repair estimate, thus presenting a report with their recommendations to your insurer. This report plays the basis to what the insurance company will pay up to or even if they are going to settle your claim at all. When all the documents and the assessors/loss adjusters report have been presented to the insurer, you should receive a letter (repair authorisation) within 3 working days.
Delays can occur in settling your claim because of negotiations between your insurers and the garage where the repairs are going to take place (garages tend to inflate their repair estimates, when they know that an insurance company is going to be paying the bill). People tend to get frustrated with such delays. Think of it this way, would you pay someone to repair your vehicle without negotiating the price first? I think not. It’s the same for an insurance company; they have to make sure that they too are not being ripped off. Otherwise if they paid repair estimates without a care in the world, they could find themselves in trouble by running out of money to pay claims.
Remember you’re not the only one claiming and therefore sometimes a gentle reminder to your agent/broker/insurer may be required. If you feel that things are taking too long and you have not been informed of your claims progress, I would suggest writing an email to your contact person giving them a deadline to advise you what the claim status is; if you still don’t get a response then follow up by contacting someone in higher management. If this fails you can report your situation to the Insurance Supervisory Department.
The new law, Insurance Act 2009, was passed in April 2009 by Parliament and will benefit us all. The new law forces insurers to pay eligible claims within 45 days of the reported accident. This law allows the Commissioner of Insurance to make sure you get your settlement quickly. The Commissioner has been given the power to fine insurers who do not adhere to this new law not more than 5,000,000/- tshs on top of the claim amount.
Claims Handling
To enable your claim to be dealt with quickly and efficiently, it is very important that you notify your agent/broker/insurer of the loss or any occurrence that may give rise to a claim immediately. You can do this by telephone, email, letter or you may visit their office. After notification they will do the following:
• Notify your insurers immediately (if you have gone through an agent or broker).
• Give you a claim form to complete.
• Advise you of the documents required and verify them to ensure their validity in relation to the claim in question.
• Advise you on each stage as the claim progresses.
• Prepare and send you a claims’ update.
Some small but very important things you must note or comply with to avoid problems in motor claims should they arise.
• Make sure that you have fully paid your premium.
• Ensure that you have fitted your vehicle with the recommended Anti Theft Device. This is a must to avoid paying higher excess.
• Ensure your vehicle is at all times roadworthy. Worn out tyres should never be used even as spares. Your policy contains a maintenance warranty and if your vehicle is not properly maintained the insurers may not honour your claim.
• Declare the values if you have fitted your vehicle with non-standard items like Alloy rims, special tyres, mini TVs, etc. This will enable your insurer to charge any additional premium so that your claim will be paid without problems.
• Your windscreen claim will not be subject to payment of excess should the damage also involve other parts of your vehicle. However if it is damaged on its own then the excess will apply. A photograph of the damaged windscreen is a requirement. Please take one before you carry out repairs.
• Ensure your vehicle is adequately insured. Avoid over insurance as you will only pay extra premium unnecessarily. Also avoid under insurance to avoid the average clause condition which states that you will be responsible for the proportion of loss arising from under insurance, meaning you will be liable to pay part of the loss.
• You should never insure your vehicle tax free as this will constitute underinsurance. Please note that should a claim occur the vehicle will be repaired with parts that are subject to tax which is unfair to the insurers.
• Never allow your vehicle to be driven by unauthorized or by unlicensed drivers.
• Note that you will be asked to meet any costs arising from betterment of your vehicle should a claim arise. If your vehicle is partly damaged at the front but requires full repainting you will be expected to chip in for the subsequent charges proportionately.
• Never use your private vehicle to ferry passengers like “daladala’s” or “taxi bubu’s”. Any claim arising from an accident will not be processed by your insurer.
• Report all incidents immediately, especially if there are any injuries to passengers or third parties. The same should be reported to police and a report obtained.
After an accident please do the following (in no particular order);
• Make sure everyone is ok and does not need medical help.
• Move safely away from your vehicle and put hazard signs on the road to warn other drivers.
• Take pictures of the accident and both vehicles even by using a camera phone.
• At an appropriate time contact your insurance company to let them know about the accident, make sure the other person contacts their insurance company too.
• Talk to the other person involved in the accident and get their insurance and contact details.
• Take all details; location and cause of the accident, time, weather conditions, type of road surface, warning given, lights showing on the vehicle and the estimated speed before the accident. (you will need to fill a claim form which will ask for this information, so to avoid forgetting anything make a note)
• If possible obtain witnesses.
• Never ever admit liability.
• Notify Police immediately (A must for all cases especially injury claims).
• After the Police have recorded the accident, move your vehicle to a safe place.
• If you can’t go to the nearest police station then give a full statement of what happened there, and get the contact details of the police officer including their police identification number.
• Enquire when you can follow up about the police documents which you will need to present to your agent/broker/insurer.
• Obtain a Police accident report and vehicle inspection report.
• Obtain an estimate of the repair cost from a garage.
• Complete a claim form. Please fill all the details required, and consult with your agent/broker/insurer if you need help.
• Submit all third party correspondence received answered or acknowledged to your agent/broker/insurer.
• A copy of driver’s license and insurance cover note is required by your agent/broker/insurer.
• A copy of the vehicle registration card or other proof of vehicle ownership is required.
• If your vehicle is impounded by the police you will need, the original insurance cover note and the original agents/brokers/insurers receipt for proof of payment. So they can release your vehicle.
In case of theft of your vehicle (in no particular order):
• Notify Police and your agent/broker/insurer immediately.
• Obtain a Police report.
• Cooperate with your agent/broker/insurer/police.
• Produce the original registration card of the vehicle.
• If your vehicle is stolen and not recovered, your agent/broker/insurer will require an original log book (if you have one), car keys (full set), copy of driver’s license, and original certificate of insurance (cover note).
• Applicable excess is payable before the release of a settlement.
JACOB’S TIPS:
Claiming is a stressful job, because your emotions are all over the place. If you have taken your insurance directly then you will have to negotiate for yourself; if you went through an agent or broker then they will do the negotiating on your behalf. Having said this, if things move at a slow pace don’t just sit back and wait, contact your agent or broker to see what is happening. Insurance is a customer service industry; therefore it’s your right to get the best service from your insurance provider. My motto is “no action, then show them your reaction”.
If you are the victim of an accident and want to claim from the other persons insurance, make sure the other person notifies their agent/broker/insurer. You will not be able to claim from them if their insurer has not been notified. This is because their insurer will have no records of the accident and will not want to take your word against their clients. To avoid this make sure that you and the other person at fault inform your respective agents/brokers/insurers and give each others numbers to them too in case they need to follow up.
The aim of motor insurance policies is to have your vehicle restored to as near a condition as the one it was in before the accident. Based on this principle, for a relatively new vehicle, damaged items will usually be replaced with new parts. However, for vehicles more than three years old (number of years can differ from company to company), the insurance company may want your vehicle to be repaired with good-quality reconditioned parts. When purchasing a motor insurance policy, you should ask the agent/broker/insurer to explain to you their replacement policy (i.e. whether your vehicle will be repaired with new or used parts). Your agent/broker/insurer should disclose to you any restrictions on repairs before you buy the policy.
Both you and your agent/broker/insurer have the right to cancel the insurance policy for any reason within a written period. Insurance companies can decide not to renew a policy after a major accident claim; these are business decisions of the insurance company. If your agent/broker/insurer cancels the policy, they will refund you the unused proportion of the premium. Some companies refund the premium on a pro-rata basis with the deduction of a small administration fee. Others use a method that calculates what would have been charged if your policy were a short-term policy. This usually applies if the cancellation is at your request. You should check with your agent/broker/insurer how it calculates policy refunds. Note that refunds may be subject to a minimum amount, and that your agent/broker/insurer may reserve the right not to refund any premium if a successful claim has been made on the policy.
Unscrambling the Puzzle of Motor Insurance
Choice of Insurer
In this article we will be concentrating on the most common type of insurance; motor insurance and trying to understand it better.
vehicles are legally required to have insurance COVER IN TANZANIA.
When buying a car, do you look for the cheapest car to buy? Not caring about the quality or safety of the vehicle? If your answer is NO, then why look for the cheapest possible insurance policy. When you want to buy a car, you look at the benefits that the car offers. You don’t just say “I’m going to spend Tshs 1,000,000/- on a new car” then buy the first one you see for sale only to find out that there is no AC, power steering etc. You know you will not get such features for that kind of value. Then why do you want to buy insurance on the same assumptions?
When you ask for motor insurance quotes and several insurers quotes are presented with variable premium amounts, you need to look at the quotes and ask yourself: am I getting like-for-like policy covers? If you look at the policies more closely and compare them you may find that some have higher excess/deductible amounts (an amount subtracted by an insurer from what they have paid for your claim, which is payable by you), certain covers may be excluded that other policies include and so on. This is why the premiums vary; don’t simply go for the cheapest.
Like I said in my last article, you will benefit from visiting an insurance intermediary such as a broker who does not endorse a particular insurer and therefore subjective to your needs. It is an insurance Brokers duty to ensure your cover is correct for your particular needs, is cost-effective, and ensure that when you have a claim it is processed promptly with the best possible settlement.
JACOB’S TIP:
When deciding on an insurance company. Try calling garages you would use in the event of your vehicle needing repairs, to ask them which insurers they do NOT want to deal with, and WHY? This will give you an insight to which insurers are better when it comes to claim settlements and reduce stress should you ever need to make a claim.
Correct Sum Insured
In Tanzania the value used for insuring your vehicle is what we term “Market” value (the price of your vehicle if you were to sell it today irrespective of how much you originally paid for it). This market value when compared to the retail value can be as much as 10% less. When telling a broker/agent/insurer the value of your vehicle you should give them the current market value.
Good brokers/agents/insurers will let you know if you have over or under insured your vehicle (such mistakes can cost heavily when claims arise). Was your vehicle tax exempt? If YES, you still need to include the tax in the market value of your vehicle. The main reason for this is because when you claim and new parts are needed for your vehicle these will be bought tax inclusive.
You also need to check that your brokers/agents/insurers are reducing the market value of your vehicle at renewal each year. Some brokers/insurers/agents never decrease the value of your vehicle each year (even though the market value is decreasing every year). They insure your vehicle at the same cost, ignoring the fact that the value at which your vehicle is insured has dropped. In effect they get an increase in rates without showing this. If you end up making a claim for total loss, you may be subject to an Average Clause (I will explain this in my next article).
A good broker/agent/insurer will re-value your vehicles market value yearly, which SAVES YOU MONEY! Most rarely do this, so ask them why they don’t. Thus you may feel your broker/agent/insurer is doing a good job holding your premium costs at last year’s level. This ignores the fact that your vehicle is probably worth 10% less now than 12 months ago due to depreciation. THIS MEANS YOU’RE LOSING OUT.
JACOB’S TIPS:
The goal of insurance is to put you in the same position after a loss as you were before. If you had 2002 VW Golf which was a total loss after an accident, you can not expect to get a 2009 model to replace it. This would defeat the purpose of a motor policy, because you would be better off. So if you have “Pimped” your vehicle you must let your broker/agent/insurer know what you have customised.
For every year you don’t make a claim, you should be rewarded with a discount on next year’s premium. This is known as a No Claims Discount or No Claims Bonus. Some insurers accept letters from foreign insurers (if you have been living abroad); stating what discount you had and will apply it to your premium. Make sure you are benefiting from this. Insurers have a maximum discount they will give; once you reach it you won’t be able to get further discounts.
At your policy renewal, ask your broker/agent/insurer if they have re-valued your vehicle. If they have not done this then ask them to explain why.
Type of Motor Policies
Third Party Only
Third Party Fire and Theft
Comprehensive
Third Party Only policy covers damage to the other person’s property caused by you where you are at fault. With this type of policy the insurers will pay for the damage. There is no cover at all for damages to your vehicle. Most insurers only offer up to a limit of Tshs 30,000,000/- for the third party liability, while others offer up to Tshs 40,000,000/-. People nowadays are buying vehicles in excess of Tshs 40,000,000/-.
SCENARIO:
You have caused an accident and totally written off a third parties vehicle (a Mercedes Benz Coupè). Your insurers liability limit is Tshs 40,000,000/- but the third parties vehicle has a market value of Tshs 65,000,000/-. Your insurance company will pay up to their limit as per the policy and you will be liable for the remaining Tshs 25,000,000/-.
Third Party Fire and Theft policy covers fire damage and if your vehicle is stolen. If you have an accident which is your fault, then cover is as per above. Damage to your vehicle is not covered.
Comprehensive policy offers the widest covers. It includes the previous policies with the addition of cover for your own vehicle. You are also covered for non-fault claims and can therefore claim off your own policy or the third party who caused the claim.
With all of these policies there are exceptions on what is covered termed as “Exclusions”. I would strongly advice you to ask the Broker/insurer/agent what is not covered, rather than what is covered. Thus if you know what your policy does not cover then you will know what it does cover. Some Brokers/agents/insurers are very good at advising you the positive attributes of a policy but not the negatives. Brokers who I have recommended my friends to seek help from, like MIC Global Risks (Insurance Brokers) Ltd, Ndege Insurance Brokers and Busara Insurance Brokers Limited have been professional in their advice; which my friends appreciated very much.
JACOB’S TIPS:
If your financial situation changes, you can upgrade or downgrade your motor policy when you need to. Visit your broker/agent/insurer to discuss this. Ask for the third party liability amount to be increased and see how this affects your premium. If it is affordable then I would suggest you take the policy with the increased amount.
Third Party Only cover is ok for people who cannot afford a better type of motor insurance or who have vehicles that are not worth much. It may makes sense if you are driving an old vehicle where almost any repair would cost more than its worth, or where its replacement might only cost a few million Tshs at most. But if your vehicle costs more to replace, you need to consider something better.
Third Party Fire and Theft (TPFT) cover is useful for those whose vehicle is not worth much, but would still cost more to replace than the cost of the repairs. It can also be useful for younger drivers who might find fully comprehensive policies very costly, those who only drive occasionally or have low no claims bonuses. TPFT in my opinion is generally unsuitable for regular drivers, or those with expensive vehicles.
Not all Comprehensive policies are the same. Although all insurers will cover the basics, many will offer additional variants on their policies, such as courtesy cars in the event of theft, breakdown or accident; currently only one insurer in Tanzania (Real Insurance Tanzania Limited) offers a courtesy car on their policy called “Amani”.
If you have more than one vehicle and all insured with the same insurer you can ask for a fleet discount (a discount on the combined total of the premiums). THIS CAN SAVE YOU MONEY!
Bulk buying always gives you the avenue to negotiate a discount. Instead of just insuring your motor vehicle, ask for a quote for your house (if you own it) and/or the contents. If you take all the insurance policies together from one insurer you may be able to get a discount on the rates.
Particulars of Motor Insurance Cover
These are the sections on all standard motor insurance policies. Depending on the type of motor policy you have, some sections may not apply to you. I have just listed and explained each one in its simplest form as follows:
Third Party Injury/Death = This covers injuries or death to a person as a result of an accident caused by you. Cover amount is usually unlimited.
Third Party Property Damage = This covers damages to another persons vehicle, house or any other property which you have damaged as a result of an accident caused by you. Cover amount varies from insurer to insurer and usually falls between Tshs 30,000,000 and Tshs 40,000,000.
Passenger Legal Liability Per Person/Per Event = This covers the legal costs for passengers you were carrying in your vehicle at the time of an accident should they want to sue you. This does not include family relatives. Insurers give a limit per person and also per event. Thus if 4 passengers wanted to sue you and the insurer was covering up to Tshs 30,000,000 the total would be Tshs 120,000,000. The insurers may have a limit per event of Tshs 100,000,000 meaning you will be liable for the other Tshs 20,000,000.
Medical Expenses = This is for your medical bills; it is usually a nominal amount because most people have private medical insurance. Some insurers do not cover this for commercial motor policies and motor cycle policies.
Towing Charges = This covers the expense you might incur for getting your vehicle towed home, to a police station, to a garage etc. The cover amount is again nominal and you will need to present proof of payment to obtain a reimbursement.
Windscreen = This covers the cost of replacing your windscreen due to damages. Sometimes, there may be a shortfall in the amount the insurer is going to pay.
Riot and Strike = This covers your vehicle if it is damaged as a result of rioting in the area the vehicle was. You won’t be covered if your vehicle was being used in the riot for carrying people etc. This is a very subjective section of the motor policy and not all insurers look to cover this.
Geographical Limit = All Tanzania motor policies automatically cover your vehicle within East Africa, the type of cover you will have when you enter other East African countries is Third Party, even if in Tanzania you have a Comprehensive policy. You must take an additional cover called the COMESA or Yellow Card cover (when travelling to other COMESA member countries) and be charged extra for this depending on how long you would be in the country. Passengers with no private medical insurance will be charged a premium.
Excess Otherwise Known as Deductibles on Motor Policies
The sections listed below all carry excess/deductible amounts. Such excesses/deductibles are there to make people drive with care or to stop claims for small amounts which you can pay for yourself. To some this may seem unfair, but I think it is quite reasonable because given the chance some people would even make claims worth Tshs 500/-.
Damage = Once the authorised repairs have been done on your vehicle, the insurers will pay the repair cost minus the excess/deductible on the policy; which varies from insurer to insurer.
Driver under 25 years of age = As mentioned above, the same applies once repair are finished. Statistics show that younger drivers get into more accidents, and therefore the excess/deductible is there to remind younger drivers to be more careful.
Driver with Licence less than 2 years = Drivers who have not been driving for more than 2 years are likely to cause accidents due to inexperience. Thus an excess/deductible is also applied which varies amongst insurers.
Windscreen = In a year you can have several windscreens replaced due to damage. This is a common claim therefore insurers apply a small excess/deductible. Some insurers even limit the number of times you can claim for this.
Theft = There is an excess/deductible applied here too. However, if your vehicle is found then the excess amount will be refunded back. The amount for this excess also varies from insurer to insurer.
Third Party Property Damage = This is the same as the damage excess/deductible but applies to Third Party Only and Third Party Fire and Theft policies.
THE EXCESS/DEDUCTIBLE AMOUNTS FOR THE ABOVE ARE SOMETIMES A FIXED OR A PERCENTAGE OF THE AMOUNT BEING CLAIMED. PLEASE REFER TO YOUR POLICY WORDINGS.
Some Insurance Brokers have a Risk Management Department (RMD); this can be very helpful when you need to source relevant information about protecting yourself. Risk Managers are able to study and design bespoke policies with your specific needs in mind, one of these RMD I have had a personal experience with is within Ndege Insurance Brokers. Brokers manage risks but a risk manager takes it to the next level.
In this article we will be concentrating on the most common type of insurance; motor insurance and trying to understand it better.
vehicles are legally required to have insurance COVER IN TANZANIA.
When buying a car, do you look for the cheapest car to buy? Not caring about the quality or safety of the vehicle? If your answer is NO, then why look for the cheapest possible insurance policy. When you want to buy a car, you look at the benefits that the car offers. You don’t just say “I’m going to spend Tshs 1,000,000/- on a new car” then buy the first one you see for sale only to find out that there is no AC, power steering etc. You know you will not get such features for that kind of value. Then why do you want to buy insurance on the same assumptions?
When you ask for motor insurance quotes and several insurers quotes are presented with variable premium amounts, you need to look at the quotes and ask yourself: am I getting like-for-like policy covers? If you look at the policies more closely and compare them you may find that some have higher excess/deductible amounts (an amount subtracted by an insurer from what they have paid for your claim, which is payable by you), certain covers may be excluded that other policies include and so on. This is why the premiums vary; don’t simply go for the cheapest.
Like I said in my last article, you will benefit from visiting an insurance intermediary such as a broker who does not endorse a particular insurer and therefore subjective to your needs. It is an insurance Brokers duty to ensure your cover is correct for your particular needs, is cost-effective, and ensure that when you have a claim it is processed promptly with the best possible settlement.
JACOB’S TIP:
When deciding on an insurance company. Try calling garages you would use in the event of your vehicle needing repairs, to ask them which insurers they do NOT want to deal with, and WHY? This will give you an insight to which insurers are better when it comes to claim settlements and reduce stress should you ever need to make a claim.
Correct Sum Insured
In Tanzania the value used for insuring your vehicle is what we term “Market” value (the price of your vehicle if you were to sell it today irrespective of how much you originally paid for it). This market value when compared to the retail value can be as much as 10% less. When telling a broker/agent/insurer the value of your vehicle you should give them the current market value.
Good brokers/agents/insurers will let you know if you have over or under insured your vehicle (such mistakes can cost heavily when claims arise). Was your vehicle tax exempt? If YES, you still need to include the tax in the market value of your vehicle. The main reason for this is because when you claim and new parts are needed for your vehicle these will be bought tax inclusive.
You also need to check that your brokers/agents/insurers are reducing the market value of your vehicle at renewal each year. Some brokers/insurers/agents never decrease the value of your vehicle each year (even though the market value is decreasing every year). They insure your vehicle at the same cost, ignoring the fact that the value at which your vehicle is insured has dropped. In effect they get an increase in rates without showing this. If you end up making a claim for total loss, you may be subject to an Average Clause (I will explain this in my next article).
A good broker/agent/insurer will re-value your vehicles market value yearly, which SAVES YOU MONEY! Most rarely do this, so ask them why they don’t. Thus you may feel your broker/agent/insurer is doing a good job holding your premium costs at last year’s level. This ignores the fact that your vehicle is probably worth 10% less now than 12 months ago due to depreciation. THIS MEANS YOU’RE LOSING OUT.
JACOB’S TIPS:
The goal of insurance is to put you in the same position after a loss as you were before. If you had 2002 VW Golf which was a total loss after an accident, you can not expect to get a 2009 model to replace it. This would defeat the purpose of a motor policy, because you would be better off. So if you have “Pimped” your vehicle you must let your broker/agent/insurer know what you have customised.
For every year you don’t make a claim, you should be rewarded with a discount on next year’s premium. This is known as a No Claims Discount or No Claims Bonus. Some insurers accept letters from foreign insurers (if you have been living abroad); stating what discount you had and will apply it to your premium. Make sure you are benefiting from this. Insurers have a maximum discount they will give; once you reach it you won’t be able to get further discounts.
At your policy renewal, ask your broker/agent/insurer if they have re-valued your vehicle. If they have not done this then ask them to explain why.
Type of Motor Policies
Third Party Only
Third Party Fire and Theft
Comprehensive
Third Party Only policy covers damage to the other person’s property caused by you where you are at fault. With this type of policy the insurers will pay for the damage. There is no cover at all for damages to your vehicle. Most insurers only offer up to a limit of Tshs 30,000,000/- for the third party liability, while others offer up to Tshs 40,000,000/-. People nowadays are buying vehicles in excess of Tshs 40,000,000/-.
SCENARIO:
You have caused an accident and totally written off a third parties vehicle (a Mercedes Benz Coupè). Your insurers liability limit is Tshs 40,000,000/- but the third parties vehicle has a market value of Tshs 65,000,000/-. Your insurance company will pay up to their limit as per the policy and you will be liable for the remaining Tshs 25,000,000/-.
Third Party Fire and Theft policy covers fire damage and if your vehicle is stolen. If you have an accident which is your fault, then cover is as per above. Damage to your vehicle is not covered.
Comprehensive policy offers the widest covers. It includes the previous policies with the addition of cover for your own vehicle. You are also covered for non-fault claims and can therefore claim off your own policy or the third party who caused the claim.
With all of these policies there are exceptions on what is covered termed as “Exclusions”. I would strongly advice you to ask the Broker/insurer/agent what is not covered, rather than what is covered. Thus if you know what your policy does not cover then you will know what it does cover. Some Brokers/agents/insurers are very good at advising you the positive attributes of a policy but not the negatives. Brokers who I have recommended my friends to seek help from, like MIC Global Risks (Insurance Brokers) Ltd, Ndege Insurance Brokers and Busara Insurance Brokers Limited have been professional in their advice; which my friends appreciated very much.
JACOB’S TIPS:
If your financial situation changes, you can upgrade or downgrade your motor policy when you need to. Visit your broker/agent/insurer to discuss this. Ask for the third party liability amount to be increased and see how this affects your premium. If it is affordable then I would suggest you take the policy with the increased amount.
Third Party Only cover is ok for people who cannot afford a better type of motor insurance or who have vehicles that are not worth much. It may makes sense if you are driving an old vehicle where almost any repair would cost more than its worth, or where its replacement might only cost a few million Tshs at most. But if your vehicle costs more to replace, you need to consider something better.
Third Party Fire and Theft (TPFT) cover is useful for those whose vehicle is not worth much, but would still cost more to replace than the cost of the repairs. It can also be useful for younger drivers who might find fully comprehensive policies very costly, those who only drive occasionally or have low no claims bonuses. TPFT in my opinion is generally unsuitable for regular drivers, or those with expensive vehicles.
Not all Comprehensive policies are the same. Although all insurers will cover the basics, many will offer additional variants on their policies, such as courtesy cars in the event of theft, breakdown or accident; currently only one insurer in Tanzania (Real Insurance Tanzania Limited) offers a courtesy car on their policy called “Amani”.
If you have more than one vehicle and all insured with the same insurer you can ask for a fleet discount (a discount on the combined total of the premiums). THIS CAN SAVE YOU MONEY!
Bulk buying always gives you the avenue to negotiate a discount. Instead of just insuring your motor vehicle, ask for a quote for your house (if you own it) and/or the contents. If you take all the insurance policies together from one insurer you may be able to get a discount on the rates.
Particulars of Motor Insurance Cover
These are the sections on all standard motor insurance policies. Depending on the type of motor policy you have, some sections may not apply to you. I have just listed and explained each one in its simplest form as follows:
Third Party Injury/Death = This covers injuries or death to a person as a result of an accident caused by you. Cover amount is usually unlimited.
Third Party Property Damage = This covers damages to another persons vehicle, house or any other property which you have damaged as a result of an accident caused by you. Cover amount varies from insurer to insurer and usually falls between Tshs 30,000,000 and Tshs 40,000,000.
Passenger Legal Liability Per Person/Per Event = This covers the legal costs for passengers you were carrying in your vehicle at the time of an accident should they want to sue you. This does not include family relatives. Insurers give a limit per person and also per event. Thus if 4 passengers wanted to sue you and the insurer was covering up to Tshs 30,000,000 the total would be Tshs 120,000,000. The insurers may have a limit per event of Tshs 100,000,000 meaning you will be liable for the other Tshs 20,000,000.
Medical Expenses = This is for your medical bills; it is usually a nominal amount because most people have private medical insurance. Some insurers do not cover this for commercial motor policies and motor cycle policies.
Towing Charges = This covers the expense you might incur for getting your vehicle towed home, to a police station, to a garage etc. The cover amount is again nominal and you will need to present proof of payment to obtain a reimbursement.
Windscreen = This covers the cost of replacing your windscreen due to damages. Sometimes, there may be a shortfall in the amount the insurer is going to pay.
Riot and Strike = This covers your vehicle if it is damaged as a result of rioting in the area the vehicle was. You won’t be covered if your vehicle was being used in the riot for carrying people etc. This is a very subjective section of the motor policy and not all insurers look to cover this.
Geographical Limit = All Tanzania motor policies automatically cover your vehicle within East Africa, the type of cover you will have when you enter other East African countries is Third Party, even if in Tanzania you have a Comprehensive policy. You must take an additional cover called the COMESA or Yellow Card cover (when travelling to other COMESA member countries) and be charged extra for this depending on how long you would be in the country. Passengers with no private medical insurance will be charged a premium.
Excess Otherwise Known as Deductibles on Motor Policies
The sections listed below all carry excess/deductible amounts. Such excesses/deductibles are there to make people drive with care or to stop claims for small amounts which you can pay for yourself. To some this may seem unfair, but I think it is quite reasonable because given the chance some people would even make claims worth Tshs 500/-.
Damage = Once the authorised repairs have been done on your vehicle, the insurers will pay the repair cost minus the excess/deductible on the policy; which varies from insurer to insurer.
Driver under 25 years of age = As mentioned above, the same applies once repair are finished. Statistics show that younger drivers get into more accidents, and therefore the excess/deductible is there to remind younger drivers to be more careful.
Driver with Licence less than 2 years = Drivers who have not been driving for more than 2 years are likely to cause accidents due to inexperience. Thus an excess/deductible is also applied which varies amongst insurers.
Windscreen = In a year you can have several windscreens replaced due to damage. This is a common claim therefore insurers apply a small excess/deductible. Some insurers even limit the number of times you can claim for this.
Theft = There is an excess/deductible applied here too. However, if your vehicle is found then the excess amount will be refunded back. The amount for this excess also varies from insurer to insurer.
Third Party Property Damage = This is the same as the damage excess/deductible but applies to Third Party Only and Third Party Fire and Theft policies.
THE EXCESS/DEDUCTIBLE AMOUNTS FOR THE ABOVE ARE SOMETIMES A FIXED OR A PERCENTAGE OF THE AMOUNT BEING CLAIMED. PLEASE REFER TO YOUR POLICY WORDINGS.
Some Insurance Brokers have a Risk Management Department (RMD); this can be very helpful when you need to source relevant information about protecting yourself. Risk Managers are able to study and design bespoke policies with your specific needs in mind, one of these RMD I have had a personal experience with is within Ndege Insurance Brokers. Brokers manage risks but a risk manager takes it to the next level.
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