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Govt bemoans low insurance uptake

FINANCE minister Dr Bwalya Ng’andu says access to financial services in Zambia remains relatively low at 59.3 per cent against a medium term target of at least 80 per cent.

During the 2019 Insurance Week exhibition launch being held under the theme “Raising an insured generation” yesterday, Dr Ng’andu in a speech read for him by finance permanent secretary Mukuli Chikuba said access to insurance services is even much lower, with three per cent of the adult population accessing insurance services and products.

He said this has dire consequences for the people, as when misfortune occurs, they either deplete their savings if they have any, are forced to borrow or simply endure the loss.

He said the consequences can end up in financial ruin.

Dr Ng’andu said to answer to the negative consequence that has left most of the adult population vulnerable, this year’s event was forward looking, targeting the young people so that they can appreciate the importance of insurance.

He implored everyone not to only target young people but all age groups as accidents and disasters can happen and affect everyone.

“The low uptake for insurance is worrying for the government. A number of reasons have been cited for the low uptake of insurance services. High on the list is lack of awareness, followed closely by our negative orientation as a people towards insurance as it is considered a waste particularly if no claim occurs,” he said. “Further, many Zambians consider insurance as a product to be used mostly for motor vehicles. As we observe this week, I call upon the organisers to ensure that we work on changing this thinking. Let us stress that one can insure almost anything under the sun, and that certain things absolutely need to be properly insured. These typically include life, health, and property. At a minimum, and if all else fails, this is the message that must be delivered to the people as we observe insurance week.”

Dr Ng’andu said increasing access to insurance requires that insurance companies continue to innovate and design appropriate products adapted to low income households, including in rural areas, and to small and medium sized enterprises.

He said while the risks faced by low income earners and SMEs are no different from those encountered by others, they are more vulnerable to such risks due to their very limited resource base.

“Therefore, they face a greater financial burden when hit by an unexpected event, such as the untimely death of a family member or injury, or loss of assets from natural disasters. I am glad to note that work has since commenced to promote inclusive insurance, through the review of the insurance Act, for which the bill is undergoing the legislative processes,” he said. “The review of the Act, among others, is aimed at providing a legal framework that will facilitate microfinance, thereby leading to increased coverage and the growth of the sector. The new law is aimed at increasing the contribution of the sector to GDP, which until now remains very low compared to other countries.

Dr Ng’andu noted that marketeers and farmers were now able to access insurance services for their products, and many companies had outreach programmes.

He urged players in the sector to continue to be innovative so that everyone in the informal sector enjoyed the protection that insurance provides.

“For our young people, let us be aware that financial literacy is about understanding investment, savings and financial protection. Let us look to the future and take steps to prepare for future financial needs, and protection of your lives, health and assets. We all face unexpected calamities no matter our status in life,” said Dr Ng’andu.

“On the part of the government, we are committed to enhancing financial inclusion, be it banking, securities or insurance, through the implementation of the National Financial Inclusion Strategy 2017-2022. When we are educated about financial services like insurance, we are empowered to make the right financial decisions, for a better future. We will also pass on those skills to the next generation.”

Acting registrar of the Pension and Insurance Authority Titus Nkwale said the Authority continued to prioritise financial education by continually scaling up insurance week activities in a bid to reach more people.

Nkwale said he was confident that awareness campaigns of that nature would significantly contribute to smart and informed use of insurance by an increasing proportion of persons and businesses in the country.

He said the last survey on financial inclusion, Finscope Survey, undertaken in 2015 showed that insurance was under-utilised in Zambia, at an estimated uptake level of 2.8 per cent of Zambians having some type of formal insurance contract.

Nkwale said that meant most individuals and businesses were not planning well for financial risks associated with such eventualities as death, illness, loss of assets and effects of climate change.

“Changing climatic conditions have put farmers at risk of low or no yields, there are fires in trading places or residential areas; there is a shift in socio-economic norms i.e fewer people are now willing to financially support others in cases of death or prolonged illnesses; our roads are busy and leading to an increase in the risk of road traffic accidents,” Nkwale said. “People must be fully aware of how various forms of insurance can cushion the impact of these misfortunes. We need the industry to provide practical solutions to the risk management challenges that individuals and small businesses face.”

He said to have a cultural shift in financial services, savings, and insurance, it was necessary to introduce such concepts at a young age.

Nkwale said Authority had increased the interaction with students and pupils through activities such as debates, awareness talks.

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