Issues retarding Batswana in the low-income bracket from taking advantage of the industry?s products are cause for concern and were the main topics of discussion at a breakfast seminar hosted by the Botswana Insurance Fund Management (Bifm).
The seminar, organized in conjunction with FinMark, came at a time when the embattled insurance industry is besieged by a spate of terminated policies and weak support from the public. The policy cancellations, which are attributed to a number of issues, have negatively affected insurance houses.
?Of course, for Bifm, as Botswana?s leading asset manager and with the responsibility for managing pension funds covering many thousands of Batswana, we are acutely aware of these issues,? Victor Senye, the Chief Executive Officer for Bifm, said.
?As an important player in the Botswana financial sector, Bifm and the Botswana Life Insurance Limited (BLIL) are both committed to extending access to financial services to a broader cross-section of the population. This will help to integrate all income groups into the modern economy and enable them to benefit from the greater stability of lifetime income that insurance and pension can provide.?
Further, the seminar aimed at heightening the level of financial education so that people can take long term investment plans, such as saving for?their lives after active employment.
The idea was to pull as many people as possible into pension schemes in a bid to reduce the burden on government?s purse.
Government has a P 165 per month dole plan for aged people?in the country.?
Top consultants from South Africa urged the industry to reduce charges, improve physical accessibility and better educate the nation on the benefits of the insurance schemes in a bid to improve the appeal of their products.
?The question of financial education is very critical but we do not have any data relating to Botswana,? Illana Melzer of Eighty20 Consultancy said.
Melzer said the issue of financial literacy is being made tricky by the low levels of financial education among the elderly people and high unemployment in the country.
?However, there is still?a silver lining?for more and more people joining?long term savings schemes as the bulk of the country?s 1.7 million people ranges?between 21 and 30 years old.
But the difficulty is with the low income earners, who constitute one-third of the?labour force, and the low savings culture in the country. The issues are further complicated by the fact that?there is no?clear?long term savings policy which compels private companies to set up pension funds for their employees.
?People are worried about saving for their old age but the problem is that they can not afford it,? said Melzer. ?Some of the people can not afford it because they are poor. And the issue is how a profit making institutions can address people who are poor.?
She said some of the impediments facing the insurance industry in Botswana include the lack of physical access which is wanting.
?If you look at the salaried market the picture is much larger,?which suggest that the issue of physical access should be sorted out,? she added.
Of the over 300, 000? labour force in the country, only about one-third of them have some form of long term savings which means there is still potential for growth.
An independent, Rob Rusconi, stressed the need for a reduction of charges, strengthening of education and possibly?come up with some form of forced saving to fish-out?potential elderly destitutes and?to try to keep the industry afloat.
However, sticky issues are still pending regarding how?private?companies can be forced to contribute for long term savings of their employees as against the severance benefits which come every five years.
He said another factor facing the industry in Botswana is the issue of low volumes (population) and dependency in the banking system. Further, he stated that the industry is also blamed for poor service delivery, especially after sales and its tradition of not being flexible?to accommodate the customer?s financial position from time to time.
?Going forward, the industry should reduce selling costs so that more and more people can afford. The costs in Botswana are very high.? It should also look at improving service after sales,? Rusconi said.
He also proposed that one of the factors which the industry has to consider is to bulk the contribution to reduce the costs.
He said one of the very critical issues which the industry has to look into include simplifying?their policies documents or?putting in the language which the target market can understand.
??There is a proportion of miss-selling. Customers are being sold products which they do not understand and, at times, products which they do not need.?
