The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has approved licenses for two companies to operate in the competitive insurance industry.
Oaitse Ramasedi, the regulator’s chief executive officer, granted Western Insurance Botswana and Western Life Insurance Botswana as insurers. The latest approval brings the number of insurers to twenty-one, with nine operating in the life insurance segment while the remaining twelve are plying their trade in general insurance.
The two newly minted insurance companies are part of Western National, an insurance arm of PSG, a well diversified financial services titan with extensive footprint in South Africa, Namibia and Mauritius. Western was founded in 2004 in Namibia. The success of the company resulted in an expansion into South Africa in 2007. In 2012, Western National was purchased by PSG Konsult Limited who together with Santam make up the shareholding.
Western specialises in short-term Insurance products and operates through a network of brokers and intermediaries, in both South Africa and Namibia. However in Botswana, the company will also tackle the competitive life insurance segment.
Victor Nnoi and Marinda Botes will be in charge of the two companies. The duo said they are fully aware of the challenges in the current market. “We are qualified and experienced insurers. Our focus is on service excellence and impeccable work ethic has helped us build a company before and our incredible reputation speaks on our behalf,” they said in a press release.
“We are very aware that strong and sound relationships with intermediaries and clients have always been cornerstones inn our achievements and we will do our best to nurture these relationships and not disappoint.”
Botswana’s insurance industry comprises of life insurers, general insurers, reinsurers and medical insurance funds. According to available data, insurance industry assets relative to GDP have declined over the years, from 20 percent in 2006 to about 12 percent in 2016. Bank of Botswana explains in its 2017 annual report that the decline in performance of the industry is a reflection of adverse conditions in the commodities markets, which affected the mining sector as well as households, resulting in a contraction in booking new policies and cancellations.
Moreover, Bank of Botswana notes that insurance penetration has been stagnant around 3 percent over the past five years. Insurance penetration is essentially the contribution of the insurance market in the economy, it is measured as gross written premium as a share of GDP. However, insurance penetration, measured in terms of uptake by adult population in Botswana, is relatively high compared to other African countries, but lags behind Mauritius and South Africa and is low relative to the country’s per capita income.
Botswana Insurance Holdings Limited Group, the local financial services behemoth, which dominates the life insurance market through its subsidiary Botswana Life has also spoken about the tough operating environment. In its 2017 annual report, the group said the environment is characterised by subdued economic growth, retrenchments, rising unemployment, stagnated incomes, intense competition and loss of key personnel.
“One of the major challenges experienced by our Group of companies is the contraction of disposable income for Batswana who therefore seek to reduce their monthly financial commitments,” said Batsho Dambe-Groth, BIHL group chairman. “Unfortunately, there is a widespread misconception that reducing or cancelling insurance cover ÔÇô both long-term and short-term ÔÇô is an easy way to ease pressure on household budgets.”
BIHL group’s chief executive officer, Catherine Lesetedi said increasing competition, especially aggressive pricing on employee benefit insurance covers and annuities, posed a challenge to attracting new business.