To Be or Not To Be Insured: How Health and Life Insurance Coverage Lingers Behind

Lelise Gezahegn, 37, is working on her Masters Degree in social anthropology at Indra Ghandi University through distance education. Before this, she had been working for an international NGO as a project coordinator in Gambella Region and earned a monthly salary of ETB 15,000.

A couple of months ago, she has been at one of the insurance companies to insure the car she just bought. However, for her own amazement, while contacted by EBR on the issue of life insurance, she has never thought about it.

“I did not consider its importance as such,” she shrugs in a little coyness for not caring about herself while caring much about her car.

Most people in Ethiopia like Lelise do not have health and life insurance policies except when it comes as a benefit package in the organizations they work for. Data from National Bank of Ethiopia (NBE) reveals that in the past six years, from 2007 to 2012, the gross premium collected by all insurance companies has grown with an average annual growth rate of 32Pct. In monetary terms, it has enlarged from around ETB 972million in 2007 to ETB 3.74 billion in 2012. But the share of health and life insurance policies premium collections is only a fraction of this figure. For example, from the 2012 ETB 3.74 billion gross premium collection, the share of the health and life insurance coverage was only ETB 233 million.

According to this data, the share of health and life insurance policies from the total issued insurance policies is only about 6 Pct. Yet, in other part of the world including India and South Africa, the amount of health and life insurance coverage from the total insurance policies is about 60 Pct.  Even from this miniature fraction, 80-90Pct of health and life insurances are procured by Non Governmental Organizations (NGOs).

The lion’s share of insurance policies in the country accounts for the general insurance policies; insurance coverage of properties damage in cases of accidents, fire or other manmade and natural hazards. In Ethiopia there are about 16 operational insurance companies from which nine of them give health and life insurance services.

“The health and life insurance in Ethiopia is generally at low level and it is even more scant when it comes to non organizational or individual purchases of these kinds of policies,” Kefelegn Sahle a long time internationally chartered insurer, who currently is working as an insurance consultant and broker, told EBR.

Though the Ethiopian employers and employees proclamation 377/2003 states that employers shall insure their employees’ health and life, it is almost ignored in most institutions and organizations.

But for Muhamed Yimer, a business man who imports rugs and curtains, the health and life insurance policy is part of his life. The business man earns good income and has purchased a health and insurance policy for himself and his family. “I can’t be sure about the uncertain future and I don’t want my family to suffer at least economically, when I am gone, and I think I became well aware of the benefits of health and life insurances while I was in Dubai,” says Mohammed.

In the past days the Mortgage Bank, now the Construction and Business Bank (CBB) used to oblige those who take a loan for building houses to have a health and life insurance to get rid of complications if the person dies. “Surprisingly,” says Kefelegn, “immediately after finishing paying their loans people would stop their insurance contracts.”

Lack of awareness among the general public, lack of government’s support to the sector, old and unrevised policies and strategies and lack of professionals in the health and life insurance sector had contributed for the limited development in the industry, according to Kefelegn.

There are more health and insurance companies than professionals; there is no institution which trains professionals in the health and life insurance in the country, even now where education has expanded astoundingly, according to Kefelegn.

“Health and life insurances are associated with wealth and in subsistence economy like Ethiopia, it shouldn’t come as a surprise if they are not well developed,” Yewondwosen Etefa, general manager of Ethiopian Insurance Corporation (EIC) told EBR on a phone interview.

For those who are in better economic status, lack of awareness could be the main reason, he notes. From the insurance companies’ side they still offer conventional products adapted many years ago. “We didn’t tailor them according to the customers’ needs,” Yewondwosen confessed.

“Our culture has a negative impact on the sector as well. It doesn’t encourage people to buy health and life insurance policies,” says Mengistu Meharu, life business operation manager at Ethio Life and General Insurance SC.

The concept of insurance is somehow related with a modern way of life with securing the uncertain future. “In the economically advanced countries health and life insurance is mandatory. However, here in Ethiopia, where talking about someone’s death is a taboo, people perceive it as a luxury,” he adds.

Health and life insurance is a relatively recent phenomenon in the country.   And reluctance of insurance companies to move aggressively to expand the sector has also contributed for its limitation, according to Dabi Megersa, Life Insurance department manager at Nib Insurance SC.

The Ethiopian Insurance Company has organized a department for life insurance and had tried to instruct a strategy to pursue the expansion of the health and life insurance though the result is not satisfactory yet, according to the general manager.

Insurance companies claim it is not profitable to sell insurance policies for health/medical alone, unless sold for those who purchase life insurances as well. “This is because insurance policies usually provide protection for things and events that rarely happen such as accidents and fire, but the certainty of paying insurance coverage for health/medical insurance policies is very high and it is prone to be abused,” Dabi says.

The government has planned to deliver social health insurance coverage and it has issued the Social Health Insurance Proclamation No. 690/2010 in August 2010. The proclamation states the Social health insurance scheme provides quality and sustainable universal health care coverage to the beneficiary through pooling of risks and reducing financial barriers at the point of service delivery. To this end, an agency was established and will officially become operational in January 2014.

Dabi hopes this government policy will help the sector to revive. He remembers how the government binding third party motor insurances has increased the number of people who buy these insurance policies.

But to elevate the challenge basic changes are needed, according to Kefelegn. Establishing well recognized institutions to train professionals, revising the old strategy and policies and sharing experiences from other countries and laboring to create a workable social perception are among the solutions.

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