The absence of technology and skilled professionals poses a significant threat to Ethiopia’s insurance sector. This issue arises from the sector’s underdeveloped nature, characterized by low penetration rates and a dependence on traditional practices. The limited use of technology obstructs efficiency and innovation, while the lack of qualified professionals affects service quality and the capacity to meet increasing market demand.
One of the most pressing challenges confronting Ethiopia’s insurance industry is the shortage of skilled professionals. Experts in the field have noted that this deficiency, along with the lack of technology, is becoming a major concern for the sector. Despite attempts to address the issue from the grassroots level, the outcomes have been insufficient, exacerbating the problem and raising concerns about the future of insurance in the country.
Recently, the National Finance Academy held a forum on this issue, where various experts presented papers highlighting the challenges related to skilled personnel within the insurance industry. During his presentation, Fikru Tsegaye, the Acting Chief Executive Officer (CEO) of Ethiopian Reinsurance, voiced his concerns, stating that the lack of skilled personnel and the skills gap are urgent issues in Ethiopia. The inability to deliver technology-supported services is detrimental to the sector. When analyzing current and new practices being adopted internationally, Ethiopia’s insurance industry is falling behind in integrating these advancements, he noted.
In Ethiopia, the challenges related to skilled professionals and the gap in providing technology-assisted services will not only impact the insurance sector but will also significantly affect the broader market. Conversely, if foreign insurance companies are permitted to enter Ethiopia’s insurance market, they will bring expertise and technology, enhancing competitiveness. This could create opportunities for companies to capitalize on market potential, which local insurance providers should be wary of, he added.
He further stated that various studies have shown that the skills gap is inflicting substantial damage on the insurance industry globally, warning that it could lead to a significant crisis at the national, institutional, individual, and economic levels. The presence of skill gaps at the national level has resulted in economic fragmentation and hindered development. A study by Deloitte, an international organization, revealed that the skills gap costs the United States $13 billion each month, with the projected cost over the next two decades estimated to reach $2.3 trillion.
For Ethiopia, it is relatively straightforward to measure the potential impact of the skill gap issue, in the absence of a formal study. If this gap occurs at the leadership level, the consequences are quite severe. Issues emanating from the skill and knowledge gap are leading to significant challenges, ranging from weakening companies to jeopardizing the future of the insurance industry. This situation is evident in Ethiopia’s insurance sector, he stated.
The design of new insurance products or the enhancement of existing ones is unfeasible without a proper understanding of risk, and the country lacks specialists in this area, which is detrimental to insurance firms. Currently, the operations within the insurance industry are being increasingly taken over by artificial intelligence, necessitating more expertise. The sector is now fully adopting artificial intelligence. Consequently, insurance companies must take critical scale into account during their planning processes.
Fikru pointed out that if the current skill gap and the low level of technology-driven services are not addressed, Ethiopian insurance companies will struggle to remain competitive. Continuing with the current operational framework is challenging, as international experience suggests that 85 percent of compensation claims need to be processed through technology. In Ethiopia, where compensation payment services account for no more than 15%, insurance companies must enhance their technological capabilities.
The insurance industry ranks as the seventh largest globally, generating 7.1 trillion dollars in premiums annually, with Africa’s share being merely one percent. There are approximately 20,000 insurance companies’ worldwide, creating 15 million jobs. Despite Africa’s population of around 1.5 billion, insurance coverage stands at only 2.1 percent, with South Africa receiving 70 percent of the continent’s insurance premiums.
Last year, 18 insurance companies in Ethiopia collected 28 billion birr in premiums, equivalent to about 220 million dollars, which is a relatively very small. They cited Kenya as an example to illustrate Ethiopia’s low premium rates. Insurance penetratio in Ethiopia is at 0.4 percent, compared to Kenya’s 2.9 percent, indicating that Ethiopia is falling behind in terms of value. The total value of Ethiopian insurance companies is 500 million dollars, while Kenya’s stands at $6.3 billion. South Africa leads Africa with 132 actuaries, Kenya has over 100, but Ethiopia has none. If these gaps are not addressed, they could inflict significant harm on the country.
Tamrat Mengesha from Addis Ababa University noted that while Ethiopia’s insurance industry is experiencing growth, it is confronted with numerous challenges, particularly the shortage of skilled manpower, which is concerning. One issue facing the industry is the lack of professionals graduating from higher education institutions. The inability to adapt to the changing global landscape in producing skilled professionals is affecting the sector. Despite the growth of the insurance industry, the absence of insurance-related education in higher learning institutions is becoming a major obstacle. To tackle the shortage of skilled professionals, it is essential to incorporate relevant programs in higher education and other systems, he stated.
Getahun Nana, event participant mentioned that the current geopolitical landscape is challenging to forecast and is characterized by an economic war. With the rapid advancement of technology, it is essential for companies to develop alongside it. As the insurance sector is anticipated to open up to foreign participation, having skilled professionals becomes vital. There are initiatives aimed at integrating with higher education, and Addis Ababa University has crafted a curriculum, although it has not been successful. He emphasized the necessity of producing skilled professionals to transform the industry.
He suggested that to cultivate professionals, it is crucial to establish connections between the Ethiopian Insurance Providers Association and higher education institutions, as well as to create specialized training programs similar to the National Finance Academy. It is essential to reassess the curricula of higher education institutions as well. The insurance sector needs support, as it plays a significant role in stabilizing and supporting the economy. Economic growth occurs when risks are shared. The insurance industry requires focused attention; without it, economic growth may be hindered. Additionally, the insurance sector demands specialized skills, and the regulations should be evaluated as well.
Yared Mola, CEO of Nyala Insurance S.C. and President of the Ethiopian Insurance Association (AEI), stated that the insurance industry faces numerous challenges in producing qualified professionals. Insurance-related courses are not being offered, and those that are available do not align with current curricula, leading to issues within the industry, which is concerning.
He expressed, “I am worried about everything we are passing on to the next generation,” and highlighted another issue: experts from insurance companies are leaving for positions in other sectors, particularly banking. Banks are recruiting insurance professionals without competition, adding to the industry’s challenges. There are also constraints in implementing essential practices that could advance the industry. Addressing problems at the grassroots level should be our primary focus, he stated.
Fikru noted that despite the growth of Ethiopia’s insurance industry, much to be done regarding technology and insurance coverage. Issues related to skill and technology gaps are significantly impacting companies. Therefore, a system must be established to address these challenges. A new working system is vital to develop skilled professionals who are in tune with the modern world. In Ethiopia, there are many degree holders, yet there is a shortage of professionals, which presents a contradiction. Thus, the disparity must be addressed, he stated.
BY NAOL GIRMA
THE ETHIOPIAN HERALD SUNDAY EDITION 27 APRIL 2025
