Ethiopian Business Review

Promotion Dilemma in Ethiopian Insurance Industry

In the insurance industry, clients demand more choice, flexibility, value and prefer getting information through multiple channels. For these clients, information regarding insurance has become a necessity. 

It is presumed that most insurers recognize this opportunity but in reality most have failed to take the necessary strategic approaches to create awareness, educate customers and increase the penetration as well as density of insurance.

There is mounting evidence that warns Ethiopian-based insurers to re-evaluate their promotion strategies since there is about 0.4 million formally insured public out of a population of more than 90 million people.

First and foremost, insurance companies must know their target audience. The literacy level of the nation isn’t high. Many people find it hard to read or write more than simple sentences in their everyday life. The language barriers also call for the due attention of the insurers since most promotional materials are prepared with “technical jargon.” 

Promoting insurance: What makes it unique? 

Insurance companies are in a unique position when it comes to promotion. They have no tangible products to sell, and insurance is termed as “unsought good” which buyers do not normally think of buying, unless forced by law or pressing need. Comparatively speaking, while the quality of manufactured goods might be easily visible to the consumer through the observation of the product’s physical features, the quality of insurance services is a largely unobservable construct. Appreciating these distinctions is important in order to capitalize on the unique role that promotion can play in the successful marketing of insurance services.  

One of the unique challenges in advertising insurance services is that consumers may not be fully aware of the various dimensions that constitute a sound insurance service. For example, while shopping for automobile insurance, consumers may be focused on the premiums and the brand names of the insurance companies’ neglecting the exclusion, terms and conditions of the contract. Consumers’ limited knowledge of the choices facing them in the marketplace can result in inefficient and uncompetitive market conditions – a phenomenon often referred to as “market failure” by economists.

Apart from flaws from insurer’s side, research has shown that consumers’ education on insurance services is generally very poor. The academic curricula of most primary and secondary education systems in Ethiopia fail to inform and educate the young on the fundamentals of insurance, resulting in uninformed and often suboptimal decisions in consumers’ purchases of insurance services over the years.

The difficulty in understanding insurance services is further compounded by the fact that the companies, auxiliaries and intermediaries are unaware of the product they are selling. This makes the task of appreciating the differences among insurance services more challenging for the average person. 

Aggressive promotional campaign

To seize the attention of the general public, Ethiopian insurers should come up with customized promotional campaigns and build on industry’s image, but unless done strategically the failure of one can garner the wrong kind of attention. There’s nothing like a good promotion, but too much artistic promotions with intense fear appeal for various insurance products got people talking, but at the end it didn’t help people remember the product’s name let alone its propagated services. 

Joint efforts by Ethiopian insurers

In Ethiopia, we don’t see the joint promotional efforts of insurers. Awareness creation efforts inherently targeting insurance services should be conducted jointly since advertisement in such cases is like rain that falls for all. Therefore, all insurers should share the cost of promotion in view of the fact that it does not focus on promoting the brand or unique service of a single insurer.  Annual promotion budget in the industry falls within a continuum of 250 thousand birr to 14.5 million although it is difficult to measure the effectiveness of their promotional efforts based on established goals. 

Bombarding consumers with fear appeal

Along with many other advertisements, attempt to ‘scare’ the audience into doing something is predominant in the Ethiopian insurance industry.  Most of the promotional campaigns focus on horrifying the audience to instigate fear and motivate purchase of insurance protection. The basic message is “if you don’t do this some particular dire consequences will occur.”

Scholars claim that “a fear appeal” can be used but it is most effective when a specific recommendation for overcoming the fear aroused threat, the recommended action is perceived as effective for reducing the threat, and the message recipient believes that he or she can perform the recommended action. 

The need for regulations for misleading advertisements 

The practice of insurance services advertising must be controlled by regulations that restrict the contents of advertisements. One of the primary objectives of regulations in financial services markets is to ensure that marketers do not present consumers with misleading information. The first objective here is to prevent the creation of biases in consumer assessment of the probability of catastrophic events and to prevent misleading information from being communicated to consumers.

The current regulatory environment should be strengthened so as to ban misleading advertisements. Unless regulatory measures are taken, the quality of promotional efforts and degree of care cannot be improved which in turn creates a nebulous environment to communicate in; but it also forces companies to develop strategies that ultimately strike a balance among the tugs of compliance, transparency, and customer rights.

The regulator should also educate the public and work hard to enhance the financial literacy level of the country since it is one its reasons for existence.

Closing thoughts

Finally, the shape of the insurance industry in the next time is also likely to be significantly different from its current form, largely due to the rapid integration of new technologies into financial services and changing consumer tastes. Furthermore, consumers’ growing level of education on financial decision making and a marketplace that is becoming increasingly challenging that will require thoughtful approaches to the promotional practices of insurers.

Most ask the question of “are the current promotional efforts creating clarity or confusion?” However, the trends indicate a marketplace that is rapidly evolving, and consumer education that are likely to change the way insurers compete in the years to come and pragmatic insurers should adjust their strategies to emerge as undisputed champ in the battle for soul. As the saying goes, “What kills a skunk is the publicity it gives itself.”

2nd Year . August 2014 . No.17

Fikru Tsegaye

Fikru Tsegaye holds MBA in Marketing and MA in Human Resource and Organizational Dev’t. He is currently working at Ethiopian Insurance Corporation as Marketing and Strategic Management Team Leader. He can be reached at

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