Netsanet Lemesssa, the Current CEO of the Ethiopian Insurance Corporation (EIC) has been on the insurance world for the past twenty two years. In fact he has been working at the EIC ever since he graduated from college. He started out as a clerk and has been working in different positions in the countryside and Addis Ababa. He will be our guest for the executive column to share his experiences and the EIC’s past and present status.
Herald: When did you start your management career?
Netsanet: I started out when I was assigned a manager at Nekete Branch (of Oromia State). Then I was transferred to the Dire Dawa district again as a manager and came to be the East Addis Ababa district Director. I had also been working as a General Insurance deputy CEO for two years before I earned the current position. It has been three years since I become the CEO of EIC.
Herald: What makes insurance different from other types of services in Ethiopia?
Netsanet: Insurance is all about selling promises but not tangible commodities. If a client comes for my service, I will give him my word of honor that I would compensate his/her losses in case an accident occurs. An accident may not occur for years and the only visible thing is our written document of the insurance contract.
And this factor would make insurance service different and could also make it a challenging one in promoting the sector than the others, which have an apparent feature of business. But if people have a deep awareness about insurance, its benefits are very crucial. First they would have the chance to handover/ transfer/ their risks with a very low insurance fee. Obviously, they harbor worries about what would happen on their families and children’s if they lose their properties or lives by accident. Therefore, insurance will take their worries and give them a peace of mind. But there is a conspicuous lack of awareness in the public.
Herald: Could you mention if there is a special event that made the EIC insurance service a life saver?
Netsanet: Let me tell you one story. When I was a manager at the Dire Dawa District, there was a Chat farmer who bought a brand new heavy track and it suffered a crash after two months. He went to the crash site and saw that his track was wretched. Then he returned home and isolated himself from the rest of the world for some time, because he spent all the money he had in his life to buy that track. On the other hand, he did not expect that his insurance would provide him a replacement. Somehow, there was a man who was working as an agent.
He used to buy insurance for the farmers, for they did not have much awareness about the service. That person came to my office and told me about the tragedy that farmer experienced. Then I myself followed up all the process for a quick repair and replacement of new body parts of the damaged track. Then, we drove the track right to his place and told him to see it.
When he was told that the EIC was taking care of his damaged track, he was just expecting a simple repair. And he did not believe the new track parked in front of his house would be his until he saw the familiar plate number and some of his properties kept inside the car. He was unbelievably delighted and grateful. He saw firsthand that insurance brought hope back to his life. Most people understand the significance of insurance when it relieves them from their harrowing pain caused by unexpected and devastating unfoldings. Therefore, the biggest challenge in the insurance world is the distribution, particularly in life insurance. That takes too much effort.
Herald: EIC is one of the pioneer insurance companies in Ethiopia. Can you afford us a peek into its backdrop-past and present?
Netsanet: The EIC was established by nationalizing thirteen private insurance companies in 1976. Since then, it had been the one and only company in the market for nineteen years delivering services related toany type of public insurance services in Ethiopia.
The most significant fact that makes the EIC legitimate is that it has been making negotiations with several international institutions for inward and outward insurance services that were beyond the Nation’s capacity. We used to reinsure to external countries and also collect from outside. However, the inward insurance has been temporarily suspended since 2011.
Herald: What was the reason?
Netsanet: First the EIC is a governmental insurance company. It has to be rated based on international standards. When you pass through these international standards there are several criteria like investment and capital. Our capital was only 61 million Birr for a long time. We cannot be rated under such circumstances. But the major factor was the differences between the risks that we and the rest of the global world have. There are so many hazardous risks that they sent to us. Hence, we were paying than what we gain almost all the time.
The risks in terms of flood and other natural disasters are much different between Ethiopia and other countries, we made our deals with. In the laws of reinsurance, one cannot go beyond its territory and investigate unless it is a very critical one. So we have been accepting premium and risk and the compensation increased from time to time. When we assessed it, we found out that it was too much loss and we decided to suspend the inward insurance temporarily.
We did not have to move on this just because we have international exposure but we also have to look deep inside ourselves and do our home works in building our capacity to come back to the international competition. In terms of building our technological capacity we are investing 1000 million Birr for software development and 250 million for infrastructure. There was also an ongoing initiative to establish reinsurance in 2011 and we believed we would make our contribution on that as well as build our capacity. Along the line, we have been retaining and reducing our unnecessary loss and increasing our capital, which has reached 592 million Birr. This is a good progress.
Herald: Is it the inward insurance issue or are there other issues that kept the capital of EIC to remain on 61 million Birr for a long time?
Netsanet: Not only that. Insurance laws obligate one to hold the total insurance payment from five to ten percent. In this case you have to boost your human resource and technological capacity. On the other hand, we are supporting other local development organizations and national projects by investing our profit as a development partner. So I believe that is why our profit did not grow as expected.
Herald: So what does the current performance and status of the EIC look like in terms of the emerging privatization focus and fulfilling the international companies that are investing in the country?
Netsanet: Currently, we are delivering insurance services for local and international institutions based on international standards. We have established our own national bureaus that could even serve insurance issues of international institutions like the COMESA. We also negotiate and include terms and conditions of international companies who would operate in our country considering the capacity that the Nation could cover. We are also upgrading several software technologies that are applicable to current times because security is a crucial element in the sector.
Now, we have a great potential that is growing displaying progress. The only thing we need to beef up our capital is to reduce, to some extent, the retaining that flows to the government. But the most significant thing in the insurance world is boosting the human resource development, technological capacity and appropriately responding to the service that the client demands. That is why we are investing a lot on these factors.
Herald: How is the insurance partnership going between developmental projects and flagship institutions in the country?
Netsanet: We have a very good reputation in the insurance service that we are involved with the Ethiopian Airlines. May be I was not born when the EIC established partnership with the Ethiopian. Ninety four percent of our payment is for outward insurance. More than thirty insurance companies participate in negotiations. We and the Ethiopian airlines are close partners and we both participate in negotiations.
That is because we have to keep them aware of how the Ethiopian is growing from time to time and its safety procedures. All the price is made based on the standards you present for negotiation in front of all the reinsurers. So we do not have a single airplane that flies without insurance. Even a newly purchased plane cannot be there without our confirmation for its insurance. As a result, our partnership is proceeding a pace at a fabulous pace. Even more, we have been covering third party reinsurance for the Ethiopian railways recent projects and we are still interested to enhance our relationship.
Meanwhile, during the past ten years the performance of EIC has been showing a rapid improvement and that is the result of the multifaceted developments and fast economic growth of the Country. Our financial and human resource is highly growing. Currently, we do not even have to wait for our reinsurers. We would pay the insurance early and receive it back from the reinsurers. Our relationship with our reinsurers is very strong and our bargaining capacity has been growing over the past ten years.
Herald: Thank you for your time?
Netsanet: Thank you for having me?
The Ethiopian Herald Sunday Edition 1 December 2019
BY HENOK TIBEBU
