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Sanlam seeks local partnerships in Tanzania
The South African insurer sees lots of potential in the market, but it needs bancassurance allies and better messaging to reach more customers
Partnerships between insurers and banks can help to increase the penetration rate of insurance in Tanzania in 2020, says Geofray Masige, chief financial officer of Sanlam General Insurance Tanzania.
Bancassurance “has the potential to be transformative,” Masige tells The Africa Report.
The country’s main banks now all have a physical presence across Tanzania, which Masige sees as “a very significant improvement. The levels of service will be quite high.”
Tanzania’s insurance penetration rate is among the lowest in Africa, at 0.5% in December, according to GCR Ratings in Johannesburg. GCR sees a “moderately healthy” outlook for growth, with gross premiums predicted to increase at a compound annual rate of four per cent over the next five years.
For foreign insurers, Masige says, there is “a lot of potential in this market. The future is open for those who come here with products.”
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The biggest challenge, according to him, is to use “local means to reach local people in a language and with a message that they can understand.”
Clear examples of this working are so far lacking, he says. In terms of life insurance, “something has to change in the way we put across the message.”
The challenge is to convert informal community arrangements into modern insurance services, he says. “We need the right partners.”
Increasing access to the internet in rural areas will help to spread the message: “The level of understanding is still very low.”
The fact that banks in Tanzania are now allowed to use their branch networks for insurance distribution is “a positive move,” says Masige.
There has been “lots of appetite from top-tier banks,” he adds. “We should be able to make progress.”
Tanzanian government attempts at industrialisation are also increasing the size of the potential market. Sanlam, which is seeking operational expansion into areas such as Arusha, is open to partnership proposals from banks.
In Tanzania, Sanlam’s bancassurance partners include the National Bank of Commerce. Across Africa, the firm has teamed up with banks such as Fidelity, Zenith and Stanbic, as well as with telecoms giant MTN to extend its reach. Such a strategy aims at giving Sanlam protection against a slowdown in its in South African home market.
According to François Jurd de Girancourt, head of the McKinsey Africa financial institutions practice, African insurance is expected to grow by seven to eight per cent in local currency terms in the coming five years. South Africa is likely to be an exception to that rule, owing to “subdued local economic conditions, coupled with the maturity of the South African market,” says Yvonne Mujuru, head of insurance ratings at GCR.
Sanlam bought the remaining shares in Moroccan insurance company Saham for $1.1bn in late 2018. Faster-growing markets such as Kenya, Uganda and Tanzania could help mitigate challenging growth prospects in South Africa.