by levy-sergio mutemba
The Mozambican insurance sector reflects the growth dynamism of the general African market. One of the most palpable common characteristics that this market shares with the sub-Saharan continent is the very low penetration rate of insurance products, in particular in the life segment. Indeed, on the basis of the data provided in August 2017 by the local regulatory body – Instituto de Supervisão de Seguros de Moçambique (ISSM) –, Mozambique’s gross life premium volume represented only 0.26% of GDP in 2016.
By comparison, Kenya displays a penetration rate of 1.04%, the highest among the sub-Saharan group of countries (excluding South Africa), followed by Malawi (0.39%), Zambia (0.34%) and Ghana (0.48%). Tanzania (0.11%), Uganda (0.09%) and Nigeria (0.08%), according to Ernst & Young’s figures*, feature among those countries that have lower penetration rates than Mozambique.
In Mozambique, the life insurance segment is dominated by traditional or plain vanilla life insurance products, with 48.9% of total life premiums, according to the statistics published in August 2017 by the ISSM. These are followed by credit life insurance (close to 40%) and, far behind, annuity (7.1%) and capitalization products (3.8%).
Credit protection, in particular, appears to be the most profitable business in sub-Saharan Africa as well as in Mozambique. In the African Insurance Barometer 2016, conducted by Swiss-based Dr. Schanz & Alms Company, on behalf of the African Insurance Organisation (AIO), based in Cameroon, its authors underscored that credit life insurance currently ranks first among the most profitable lines. The survey was conducted between October 2015 and March 2016, consisting in interviews with 28 senior executives representing regional and international insurance companies, including Mozambique-based Empresa Moçambicana de Seguros (Emose).
Insurance firms depends to large extent on non-income factors such as infrastructure, regulation, education, and skills that enable an efficient distribution network to link companies to their potential subscribers
“As many loan agreements require credit life insurance to protect lenders, the product is in high demand, not only in the microinsurance arena. Claims ratios are typically very low, making the product very profitable for Life insurers”, says the report. At the same time, credit life premiums in Mozambique accounts for less than 7% of the total life and non-life premium volume ($176 million).
The insurance market, and in particular the life segment, is generally supply-led, especially in very low-income countries like Mozambique. Insurance firms depends to large extent on non-income factors such as infrastructure, regulation, education, and skills that enable an efficient distribution network to link companies to their potential subscribers.
After having surveyed 125 insurance executives and regulators in six East and West African countries in 2016, consulting firm Ernst & Young shows that “respondents made clear that education and building trust are critical going forward, particularly in regard to informing a population that remains largely unaware of the value of insurance”. This means that the approach of the insurance industry should be proactive and not passive, if these are to prosper in the long term.
Lack of skilled labor pool, notably in the actuarial and risk management fields, affects both the public (regulators) and the private sectors. The study published at the end of 2015 by ODI, a leading UK-based think tank sponsored by British insurance firm Prudential, explains that of the mere 1100 trained actuaries in Africa in 2013 only 100 were operating outside of South Africa.
Recently, the Actuarial Society of South Africa (ASSA) said that “while the number of African, Indian and Colored actuaries grew from 51 in 2006 to 239 in 2016, the pace of transformation has been too slow”. In March 2017, in a press release, ASSA said it expected the number of qualified African actuaries to double over the next three years.
Roseanne Murphy Harris, President of the ASSA, specifies that the number of African actuaries only grew from 28 to 82 over the last ten years. “Therefore, she adds, growing the number of African Fellows by potentially 100 over the next three years would be hugely positive for the profession.”
There are no statistics yet about the exact number of actuaries in Mozambique. However, one way to assess their collective size would consist in observing how those who employ them develop over time, that is, the intermediaries which form the insurance distribution network.
At the end of 2016, a total of 586 such intermediaries had operations in Mozambique. This represents an increase of 21% compared to 2015. They were only 336 at the end of 2012. These are composed of 80 insurance brokers (78 insurance brokers and 2 reinsurance brokers), 14 insurance agents registered as companies, 125 agents for personal or retail clients and 367 insurance promoters.
The number of agents for retail clients has almost quadrupled since 2014, when these were only 33. Insurance agents registered as companies have doubled in number over the last three years. Though these figures reflect a significant base effect, they nevertheless mirror the dynamism which is taking place in the Mozambican insurance market today.
Regarding insurance brokers, experts at the ISSM in Maputo explain that the volume of premiums proceeded last year by this segment do not entirely reflect its performance. Insurance brokers’ gross premiums represented more than 46% ($80.5 million) of all premiums processed in the country in 2016. The number may actually be much higher, as only 49 out of the 80 Mozambican brokers have shared their data with the ISSM.
Interestingly, it is in the life segment that insurance brokers’ revenues grew the most, increasing by a little more than 45% last year to reach the equivalent of USD 4.75 million. While non-life revenues increased by 74.3% in 2016 to USD 75.75 million. Motor insurance revenues for their part jumped close to 55% to USD 25 million. It is interesting to note that, though from an extremely small number by many standards, revenues in the transported goods segment have bounced almost 480% last year to USD 1.2 million.
The Mozambican insurance brokerage market, like the insurance market in general, is undergoing a fragmentation due to the arrival of a relatively high number of new entrants in a fast growing developing economy. A broker such as Aris Mozambique, who was the third largest broker in terms of market shares in 2015, has become the largest in 2016. However, its market shares have decreased from a level of 25% in 2015 to 16.8% last year, due to new competitors that were not accounted for in the 2015 INSS’s survey.
However, AON Mozambique, who held the largest market share (15.7%) in 2015, now ranks third with a share of 14.7%. Brokers that were not included in the 2015 survey include Nacional Brokers (already the fifth largest with a 10.4% market share), Maleseguros (seventh, 4.6%), SABSEG (ninth, 1.6%) and MAC (tenth, 1.5%). Insurance brokers have recorded higher revenues in all business lines, except in the aviation segment.