Favored by economic growth Tanzania’s insurance industry registered a CAGR of 17.5% from 2008–2012.
|The Tanzanian economy, the second-largest in the East African region after Kenya, remained relatively unaffected by the global financial crisis with a 7.0% rise in the GDP between 2001–2010. This growth is expected to continue in the coming years due to public investment in infrastructure and a proposed investment on mining and natural gas projects.
According to new research from Timetric growing public investment in infrastructure, expansion of distribution channels, new product development and rising healthcare expenditure will be key drivers of the insurance industry in the future.
Low insurance penetration rate create scope for future growth
The Tanzanian insurance industry penetration rate (measured as gross written premium as a percentage of GDP) increased from 0.77% in 2008 to 0.82% in 2012. Despite the increase, it remained below the African average of 3.9% and that of neighboring countries such as Kenya and Ghana whose penetration levels were 3.2% and 1.8% respectively. This low level of penetration indicates that the insurance industry is performing below its potential and has significant scope for future growth.
Expansion of alternative distribution channels
In Tanzania, brokers are the main channel of distribution of insurance products, accounting for 65% of the total gross written premiums. However, the strong growth of mobile networks has emerged as an alternative channel for distribution. According to World Bank statistics, 63% of the Tanzanian adult population (15.6 million individuals) possessed a mobile phone in 2012. Furthermore, banks and other third party organisations, which have an existing client base, can provide insurers with access to new customers and can help to overcome current challenges in the distribution of infrastructure.