Warren Buffet once said, “The success of an auto company getting into an insurance business is as likely as the success of an insurance company getting into the auto business. Insurance is that difficult a business”. In recent years, knowledge on the importance of insurance has been increasing at a significant pace with various insurance products offered by insurance companies now available in the market. Warren’s words should trigger focus on the rise of different types of market players and whether they can keep up with the demand and changes.
Insurers have enormous latitude in figuring their underwriting results, and that makes it very difficult for investors to calculate a company’s true cost of “float” (being money we hold but don’t own). In an insurance operation, float arises because premiums are received before losses are paid, an interval that sometimes extends over many years. Errors of estimation such as reserving adequacy, usually innocent but sometimes not, can be huge with a consequent impact on earnings.
So the challenges in striving to record attractive underwriting profits are obvious, but more generally how can the market players show resilience and at the same time earn bragging rights based on their impact in the Tanzanian economy? I would suggest the following three priorities: digital focus, stakeholder engagement and talent development.
In terms of digital focus, recent years have seen the expansion of mobile wallets, payment infrastructure, and enabling regulation of payment service banks and institutions, all of which is expected to facilitate premium and claims payments. Clearly, digital has to be a core element of strategy for insurers, but to be effectively implemented the approach to digitization needs to be end to end, for example, including back-office process automation for servicing stakeholders (including claims handling) as a response to mounting cost pressures