Insurance salesmen in Africa note the low number of Africans who hold life insurance policies. In developed countries insurance policies serve as savings accounts and the funds can be lent to governments and investors for development projects. Africa’s insurance companies say the sector needs reform if insurance is to gain credibility and popularity. From Douala, Voice of America English to Africa reporter Cameroon Ntaryike Divine, Jr. tells us that In West and Central Africa, the life insurance sector makes up 20 percent of the regional gross national product.
The Inter-African Conference on Insurance Markets, CIMA, says this is reportedly one of the lowest percentages in the world. The group is in charge of managing and boosting the insurance market in the region. It works in more than 14 francophone countries in West and Central Africa. Insurers say public apathy about life insurance is the result of low incomes, the poor management of insurance companies and cultural preferences. For example, many in the region prefer to save in community groups called “Njangi,” rather than in insurance policies or banks. Others say “saving for death” is repugnant.
Insurance is also expensive.
The typical Cameroonian earns about $150 a month. Only a few expatriates and staffers at multinational companies have salaries of 600 dollars and above. So, most people see little reason to buy life insurance policies, which many say costs too much.
Humphrey Tande Mosenge is a former manager for the U-S based insurers Prudential and American International Group (AIG). He says the number of policyholders has remained low, despite monthly premiums as low as 10 dollars.
Tande Mosenge, who now runs his own insurance company in Cameroon, says the product is still seen as elitist:
“Not everybody can buy and maintain a life insurance policy for a long time. Employments are not secured. As you know, with globalization, the better-to-do citizens can always go to Europe, to America and buy their life insurance. So how can our products locally be competitive so that you are not attracted to go abroad to buy life insurance?”
Management problems have also contributed to the collapse of some insurance companies in the region, including two in Cameroon since January 2007. Neither has reimbursed its policyholders. And the image of insurance companies has been seriously tarnished because potential policyholders fear their funds will be stolen by corrupt managers.
Insurers in francophone West and Central Africa are trying to revive the sector through a series of brainstorming workshops. For example, they are also urging governments to take measures to promote the purchase of life insurance policies as a way to encourage saving.
Tande Mosenge thinks of life insurance premiums as a form of long-term savings. He says they could be used to fund development and investment projects and curb African governments’ heavy dependence on external borrowing.
Government can help in the sense that life insurance encourages the savings of the country. Life insurance reserves have been able to build big nations because they increase the funds available in financial institutions that people could borrow to develop the nation.
Other proposed solutions include the revision of mortality tables used to calculate life insurance policies. This would lower the premiums.
The current tables are nearly 50 years old and include long life expectancy estimates. Insurers are complaining that the estimates remain unduly high, despite the effects of emerging diseases like AIDS.
The 130 life insurance companies in the region are urging governments to reduce taxes on businesses, which they say are excessive. They are also drafting a tax cut bill, which they intend to propose to finance ministers of the region.
Martin Foncha is director general of the Cameroon-based All Life Insurance Company. He is part of a CIMA think-tank suggesting ways to pull the sector out of its current slump. He says governments should cut taxes to attract potential investors, “The most important will be fiscal incentives. You can not be taxing savings. If you want to compare Cameroon with the Ivory Coast, which are similar economies, the Ivory Coast is producing three times more insurance business than Cameroon, because they already have certain fiscal incentives, but in Cameroon, we don’t have anything like fiscal incentives.”
Foncha says CIMA is planning to clamp down on poorly managed companies and is urging governments to look for ways to increase salaries. But he says the road ahead is long.