Wednesday, September 1, 2010


By Jehovaness Zacharia; FE Project Consumer Adviser (Legal).
Tanzania like most of the African countries have a long history as far as financial services to the consumers is concerned. I analyzing the issue above, I find it important looking at where the country was to where we are today. Soon after independence, Tanzania adopted socialism and things were run communally. All the financial services were under the government. There was one Insurance company which was National Insurance Company owned by the government as well.

The consumers of insurance services in Tanzania had and still are facing a number of challenges which some of them are historically oriented (legacy). With this I find the consumers themselves bring challenge in the insurance market in Tanzania.

During colonialism, the Tanzania (Tanganyika by then) consumers believed that the Insurance policy is bought by the rich people only. And this was the case since the colonized had nothing to insure apart from his own life of which still even if he knew he was not economically well to do it.

Soon after independence, though there was communalism but still there was gap between the haves and have-nots, and the earlier who are the minority are the ones who had been using insurance services. The later would be in the position to but they wouldn’t since majority of Tanzanians were uneducated and financially illiterate.

In late 1990s Tanzania government reformed its financial sector and it allowed private entities to operate in financial sector and this includes insurance sector. These apart from increasing the number of players in provision of insurance services, it also widen the consumers field of choice when it comes to choosing which product to purchase, on my view this is as well a challenge in an illiterate market.

Though Tanzania financial sector is still in its early stage of development, there is rapid recent growth in the supply of financial services including insurance services; this means that consumers are increasingly faced with complex set of options and decisions. To me, all these pose a number of challenges in the insurance market in Tanzania.

The Tanzania consumers are faced with number of challenges when using insurance services. I can group the challenges into two categories. One if challenges from the service provider plus the regulators so the market point of view and from consumers themselves.

In my own view, I see challenges from consumers themselves include lack of knowledge regarding insurance. The 2009 FinScope report reveals to me the facts that, 14% of people who do not use insurance said that they do not know at all what insurance is, 12% said they do not know how to go about it, 16% do not know how to buy it.

Therefore, the know-how in using insurance among Tanzania consumers has been of great essence. And since they lack this, this brings in a great challenge to consumers.

Again with FinScope report on 2009, depicts that 17.4% of Tanzania consumers never heard of insurance phrase at all while the 39.0% heard the word but they do not know what it is and 43.5% heard about it and know what it is! Therefore, more than 50% lack knowledge of insurance.

Another challenge I see with the consumers is bad belief concerning Insurance in general. For few Tanzanians who have little knowledge of insurance who despite of the little knowledge they have, are still not using it believing that insurance services are meant for rich people and since they are not rich, they belief that it was never meant for them.

Also due to religious belief people who have been taught to keep their faith to their God and not in human beings and so buying insurance policy means keeping your faith in insurance companies which is a sin. Also buying insurance policy is believed to predict ones death (for life insurance) or loss/damage (for property) and so doing so is calling a bad lack to oneself. I see this as a challenge which face consumers when use insurance services and this particular challenge hinder them from utilize the services.

There is also a bad look/ conception of insurance companies by the consumers. Some consumers see the companies as “conning” companies and so by no means do they want to buy insurance policy. They think asking someone to insure the house against fire accident for instance and what will happen to their money if their house doesn’t get fire outbreak?! To me, this seems as, these consumers believe that, the companies want them to insure over things which the possibility of them happening is either not there or zero point zero zero one something, and therefore getting money from them (consumers) is like conning them.

All these, but to mention a few, on my view, are some of the Tanzania consumers’ beliefs when thinking of using insurance services.

Understanding of terminologies used in insurance policy has as well being a big challenge among Tanzania consumers who utilize insurance services in Tanzania. Due to this problem, some have found themselves buying the policy they actually never intended to buy. For example in failure to understand the terms used, one may decide to buy a cheaper policy which will not cover all that s/he wants it to and when this person incur an accident and the insurance company refuses to pay off on the ground that the policy does not cover the loss incurred, the policy holder complains. But all is due to misunderstanding of the terminologies and to me this is a crucial challenge to consumers.

On the other hand, there are challenges from the market side. I have included the challenge from the insurance providers, the regulatory bodies and other market players. These challenges include but not limited to the following;

Non disclosure of information by the insurance brokers, when the consumers buy the insurance policy there are information which may make the insured think twice on whether to buy the policy or not, these info are not well explained to the consumers. Also I see the possibility of consumer hiding some information but on my view, if consumers would be well informed of the effects of non disclosure, they would act differently.

On my view, there is an issue of delay in meeting the claims of consumers who are entitled to redress from the insurer. There is a time frame prescribed for insurance claims to be met, but due to already mentioned lack of information to consumers, the insurance service providers do not comply with such requirement.

According to the new Insurance Act, s.131 the insurer is required to pay the claim within 45 days from the date of receipt of executed discharge.

Nonpayment of insurance claims is yet another challenge facing Tanzania consumers using insurance services. I am distinguishing between delay in making payments/redress and total refusal to pay. Some consumers who incur losses which are covered by their insurance policy but the companies find a way to abstain from paying the insured. This is challenge to insurance service users and a discouragement to others who are yet to use the services. On my view, this might be the sole reason why other consumers view these service providers as con companies.

As far as legal position is concerned, most of the insurance service consumers are not aware of their legal rights and responsibilities under the insurance law and policy. The concerned body has so far put into place the program which will be helping the consumers understand this law and the regulatory body established under it, and this is none other than the Tanzania Insurance Regulatory Authority (TIRA).

Since the law is not known to the insurance service users, the one who are aware of the service and utilize it are no aware of where to go in case the insurance contract seem to be ambiguous to him or more beneficial to the insurer than the policy holder. They think having an option to go choose another insurer, automatic discharges his right to complain over the unfair terms of contract offered to him by the insurer.

The law clearly explain that the commissioner of TIRA has power to delete or amend obscure or ambiguous terms in contracts of insurance [s.11 (d) ii], or items and conditions in the contract which are unfair or oppressive to the policy holder/consumer [s.11 (d) iii]. To simplify and clarify the terms and conditions of insurance contract can as well be done by the commissioner. I can see the challenge to the consumers is the fact that these and more other things of their favour provided in the new Insurance Act are not known to them.

Tanzania Consumer Advocacy Society (TCAS) as the only consumer private organization in Tanzania is doing all it can to ensure consumers are protected and with regard to insurance service consumers, TCAS is running a big campaign which was preceded my consumer need assessment which had revealed most of the issues raised here. The need assessment has enabled the organization to identify the need of insurance service users.

The campaign supported by DFID under the Financial Education Fund, TCAS together with the London based organization known as Consumers International (CI) and other financial education experts like Microfinance Opportunities as well as ESF Apex Strategies are providing financial education to Dar es Salaam consumers as well as providing free consumer advice in the center established known as Consumer Advice Centre (CAC).

This campaign among other things will help the consumers of financial services in Dar es Salaam and neighboring regions to understand the challenges ahead of them and how to go through, the law, policy, and regulation as well as to know regulating bodies in place and what are the consumers’ position.

TCAS campaign will go hand in hand with the establishment of Consumer Advice Center which will be providing free consumer advice on financial matter, and this will not exclude consumers who visit CAC for other non financial related matters.

All that TCAS is doing is to supplement what the government has started or is doing in ensuring that consumers who are utilizing insurance services are protected and informed. The Insurance Supervisory Department launched financial education program in 2009 adhering with the Second Generation Financial Sector Reform Program (SGFSP)’s advice on the same.

On my personal view, as TCAS project consumer advisor on legal matter, with regard to challenges facing Tanzania consumers when utilizing insurance services are as outlined above. The challenges show that all market players are concerned in one way or another. This is because, all players have their role to play in ensuring that the market practices are not abused by any of them.

Legal and institutional frameworks are important reforms in encounter these challenges. Having legal and institution frameworks reformed but not known to the people to me is an incomplete action taken.

The work of making the institution known not necessary have solely be done by the creator of the said frameworks. Other stakeholders need to put in their efforts in making these known to consumer. Taking an example of the better enacted law and the authority made under it which is hardly known to consumers! The service providers focus on making profits and so they care less on whether the consumer’s rights are adhered to or not.

Therefore, I am calling upon other players; these include the service provider to support consumer movements which aim at helping out consumers to understand their position in the market. This not only will reduce the number of complaints arising between the consumer and the service provider, but also will increase the number of consumers who will be using the insurance services and this will result into increase of profit it the service provider as well as increase national income which in turn will come back to the consumers in the form of social services.

I believe the say “together we stand, and separate we fall” with this in mind, let’s all players join our efforts together in helping the consumers overcome the market challenges since, together, at the end of the day, all of us are going to be beneficiaries of whatever efforts we are putting in.