Insurance sector raps gov’t for ‘overcrowding’ market
The insurance industry says governments in Africa are crowding out private enterprise, particularly in the health services sector, which impedes growth and innovation. Across the continent, governments lead in the provision of healthcare to the public, often at subsidised rates, leaving a sliver of the market for the private sector. This, insurance sector experts say, inhibits the growth of the industry.
For Sanlam Nigeria CEO, Valentine Ojumah the insurance industry in Botswana has been slowing down due to “too much involvement by government”. Ojumah said government’s broad role in the economy has left insurance companies in the cold with few services to offer to citizens.
“Insurance in this country is not taken seriously,” he told Botswana Life’s recent insurance seminar.
“The government is too invested in playing a role in people’s personal lives and it has made it impossible for Botswana’s insurance sector to grow and stretch to other sectors.”
According to Ojumah, services such as healthcare should not be free to allow for competition and innovation from insurance players. In Botswana, the government provides highly subsidised healthcare to all citizens, encompassing consultation by medical professionals, medicines and post-consultation in all public health facilities.
In recent years, however, agencies such as the Bank of Botswana and other advisers have increasingly pressed government to tighten its subsidies around services such as healthcare and education, in light of declining public revenues.
“You can’t be in a country with so much HIV/AIDS and yet the majority of the people don’t have healthcare insurance,” Ojumah said. “This is because government bears the risk. “The people won’t take up these products from insurance and it will be hard for the industry to continue growing.”
For the 2023–2024 financial year, the Ministry of Health has been allocated the second-highest share of the recurrent budget with P10.3 billion, representing 17% of the total. Much of this will be spent to extend free healthcare to the citizens.
The spending comes after the COVID-19 pandemic highlighted the limitations and pitfalls of government shouldering the burden of healthcare in the country. According to Ojumah as long as government keeps stepping in, the health insurance sector will not grow.
Botswana Life CEO, Ronald Samuels said the road ahead for insurance companies is long and bumpy. Despite the sector’s positive financial outturns, Samuels said the growing gap between insurance products that people are buying and what they need to be purchasing, known as the Insurance Protection Gap (IPG), is a growing concern for the industry.
Samuels revealed that the IPG for Botswana stands at 47%, which means that 47% of all insurance products bought in Botswana do not cover the risk they have to mitigate.
“In Botswana, businesses are underinsured putting the security of their dealings at risk and we acknowledge that there are huge risks ahead,” he said.