Domestic and foreign investments have to be sustainable, and one way to ensure sustainability is making certain the expansion of reliable insurance products.
Businesses of all kinds, small or big, are prone to internal and external shocks that put obstacles along their journey. The proliferation of insurance companies therefore green light businesses to stand on their own two feet at times of shocks.
The financial sector in general and insurance sector in particular has seen undeniable developments over the last years. Over 17 domestic insurers operate in the country expanding branches relatively in all parts of the country.
This does not mean that they have reached to the desired levels. Yet, their capacity and accessibility has remained far below expectations. This important wing of investment should see the light of day in terms of relaxing the legal environment they could operate.
Lopsided growth provides complete ingredient to assured destruction. What does it mean? It means that growth pillars that take better shape and strength at one side while crippling at the other are prone to damages.
The thing is to say that paying too much attention to light and medium-manufacturing industries in the state of weaker insurance system is just a short-lived ambition.
Quite often, the government talks of risks foreign involvement in the financial and banking sector may bring if allowed to operate. Nobody can downplay this fact. However, ‘one cannot avoid sleeping for fearing nightmare’ as Amharic adage goes.
The acceptable argument should center at boosting own capacity, capacity in knowledge and technological skills as well as catching up with other relevant international expertise. Of course, doing so could not be attained overnight.
Available data proves that the total share of private insurance companies stands at 35 percent at present. Moreover, foreign insurers are restricted from operating in the country.
Actually, the future keeps better legal environment in store.
The reformist administration of Prime Minister Dr. Abiy Ahmed put direction to open up certain areas of investment to the participation of reputable firms, even foreign ones, though not exactly the financial and insurance sector. As excellence cannot come by independently of healthy competition, the government should conduct adequate studies to see into ways ensuring excellence in the insurance sector as well, in one hand.
More encouragement in all fronts must also go to domestic insurance investors on the other.
Technological sophistication and innovation have to get center stage at the investors’ activities. Services as well should match customers’ ever-dynamic demands. The government’s role is, therefore, to build the capacity of the domestic companies, not to mention the creation of enabling environment to their operation and cooperation.
Most insurers compete in narrow areas. Motor insurance for instance. However, if they come up with innovative models that could strengthen their financial capacity, there is ample market for them to seize, as studies show.
The aspiration is clear, joining middle-income economies in the near future. Hence, the country has rolled its sleeves to attract more and more investors. Ethiopia is obviously one of the top FDI destinations in Africa. Thus, the sustainability of the businesses and the attainment of the vision depend on the reliability of the insurance sector, among others.
Regarding expertise, Ethiopia has a number of seasoned experts both at domestic and international level. The government’s effort of utilizing these expertise observed in other sectors should be replicated in the insurance business as well.
The Ethiopian Herald February 22/2019
