Concerted efforts needed in raising insurance awareness

THE 6th Insurance Conference will be held next week from November 18-20, 2020 under the theme “Seizing opportunities for growth amidst challenging times.” Against this backdrop, today, we revisit an article published on March 10, 2020, emphasising the need for concerted efforts to increase the uptake of insurance.
The first time I came across the word insurance was when I was in grade 10 in a subject called commerce.
In that subject, insurance was explained from the point of view of being one of the aids to trade.
After that, in 2004, I ‘accidentally’ found myself working for an insurance company against my dream career of being an economist.
From my career experience spanning over 15 years, very few dream of pursuing insurance as a career.
It is primarily because of a lack of awareness of insurance and its benefits in the Zambian society.
According to the Finscope study of 2015, insurance uptake in Zambia stands at 5.5 per cent of the adult population.
This figure is low compared to other industries like banking which had a penetration of 24.8 per cent as of 2015.
In terms of contribution to Gross Domestic Product (GDP), insurance still contributes below two per cent.
It is lower than the average African penetration of 2.8 per cent.
In South Africa, the penetration level is about 13 per cent.
One of the reasons why penetration levels are so low in Zambia is the lack of awareness of insurance and its benefits. As alluded to above, few platforms focus insurance matters.
It calls for concerted efforts from stakeholders, and this platform is, therefore, a response to the need to raising awareness of insurance and its benefits.
Insurance, as one of the aids to trade in commerce, is a Risk Transfer Mechanism (RTM).
The word risk; the uncertainty about the future, is the cornerstone of the whole insurance business.
The English term ‘risk’ originates from the French word risque.
It is relatively modern, having entered the language around 1650.
It was first used in a formal legal sense in insurance documents that date to around 1730.
Transfer contextually refers to the passing on of the risk to another party.
At the same time, the mechanism involves the processes of this risk exchanging hands, i.e. from one party known as insured to another known as insurer.
There is a very sophisticated mechanism engaged in insurance, but before getting into the details of these sophistications, I will keep it simple for now.
A good example reminiscent of insurance which I have come to appreciate over the years is that of a person during the rainy season contemplating whether it will rain or not.
The known fact in a rainy season is that at some point it will rain but when exactly it will rain may not be known precisely (notwithstanding improved technological means of weather forecasting which may not be accurate in themselves).
Being found in such a situation, one has an option of carrying an umbrella or a raincoat to cover him/herself from the rains.
The opportunity cost of not taking an umbrella is the risk of being soaked while that of having an umbrella maybe some added baggage to carry.
A decision, therefore, must be made.
Furthermore, whether this person makes a conscious decision, i.e. whether or not to take an umbrella; it does not change or eliminate the risk of the rains; it will either rain or not.
Similarly, insurance acts as an umbrella or raincoat to protect someone against the risk of being soaked from the rains.
The added baggage may be equated to the premium one pays to the insurer which guarantees protection should the risk occur, i.e. should it rain.
Insurance is a promise of compensation for specific potential future losses in exchange for a periodic payment.
Insurance is designed to protect the financial well-being of an individual or entity in case of unexpected loss.
Like any other contract, insurance has terms and conditions.
The customer needs to know the key or salient terms and conditions of the contract.
In my spanning insurance career of sixteen years, I have seen a lot of cases where customers sign for a policy without understanding the detail of the cover.
It is not only peculiar to insurance contracts; it is common to other types of arrangements as well.
For example; when applying for a loan at a bank, the applicant is made to sign documents without reading because the focus is usually on getting the funds.
In a contract, what you sign for, ‘you live with’, and what you do not sign for, ‘you live without’.
It is therefore essential that the minds of both customers and insurers’ meet’ before signing an insurance contract.
It will only become true with increased financial education, specifically on insurance, by all stakeholders to the insuring public.
For comments or questions, email or or visit the Facebook group; Insurance Platform or follow me on LinkedIn on my Facebook page.

Facebook Feed