Yared Mola

Yared Mola,CEO of Nyala Insurance on Pandemic Insurance

Yared Molla has been in the insurance industry for over 27 years. Before joining NyalaInsurance seven years ago, he worked for Ethiopian Insurance Corporation. After assuming the role of CEO at Nyala Insurance, he has stirred the company to the forefront of the insurance business as it became the most profitable insurer in the country for almost half a decade. Under his leadership, Nyala grossed a profit of ETB184 million in 2019/20, which is a record-high in the private insurance industry and ETB15.5Pct higher compared to the preceding financial year. Its gross written premium also reached almost half a billion birr, while having an asset of over ETB2.1 billion. Enthralled by his performances, African Insurance Organization (AIO) bestowed up on Yared the prestigious ‘CEO of the Year’ award for his unparalleled leadership capability and outstanding contributions to the insurance industry. EBR sat down with him to clear the recent confusion over the coverage of pandemics under life insurance policy and his career in the insurance industry.

Pandemic insurance is usually not covered by most insurers in the world as it may expose them to pay huge amount of claims. What is the situation in Ethiopia?
When we see where the insurance policies and insurance related laws stand in the current COVID-19 pandemic, we identify two major areas. The first one is business interruption insurance (BI). This is an extension of insurance coverage of protected property against financial losses incurred as a result of interruption or disruption of normal business. Business interruption claims are being entertained worldwide as a result of the COVID-19 pandemic, in policies where it is not explicitly excluded. I have not come across businesses in Ethiopia insured for business interruption, except one customer of Nyala Insurance.

The second one is life & Health Insurance coverage. Most insurance policies, international and domestic, cover life and health insurance risk against COVID-19. However, a few countries with previous Ebola pandemic experience excluded pandemics in their policy; hence, they are not entertaining COVID-19 claims. So far, we have no claim for both business interruption and life & health insurance policies.

Do you think it should be covered?
We are seeing every day that the challenge from this insidious virus is daunting. We are also heartened by the acts of courage and humanity extended from all corners. All professions should also contribute to this and insurance is not an exception. Yes, as much as possible it should be covered.

Some insurance companies EBR spoke to said that they are not obliged to cover pandemic insurance as their agreements with clients do not oblige them to do so. Do you think Ethiopian insurance companies should cover the pandemic?
Whenever we question whether a particular risk is covered or not, we need to look into two aspects. The first is the insurance policy terms, conditions, exceptions and exclusions sold for the customer. The second is the treaty agreement the insurance company entered with its reinsurer. I do not think pandemic is an excluded peril in most of the life insurance policies sold in Ethiopia. However, with regard to its reinsurance coverage, I am unable to comment as the reinsurance treaty & agreement varies from company to company.

Is there a consensus amongst insurance companies to cover Coronavirus?
No. Not yet. Should there be? In fact, there should not necessary be an agreement amongst insurance companies. It is solely based on the risk appetite and risk management philosophy of each company.

How is the response of reinsurance companies to the decision of some insurance companies, including yours, to cover pandemics, particularly the Coronavirus?
To entertain your claim, what all reinsurers simply do is refer to the articles of treaty they sold you. If pandemic is not excluded, they will cover the claim as per the agreement. In our case, both our life insurance policy and reinsurance treaty do not exclude claims caused by pandemics like COVID-19. Hence, all our existing and new life insurance customers are automatically covered against COVID-19.

Reinsurers are also currently paying huge claims worldwide. For instance, Lloyd’s revealed on May 15, 2020 that it expects to payout in the range of three billion dollars to USD4.3 billion to its global customers as a result of the COVID-19 Pandemic. According to Willis, (Willis Tower Watson Global Brokers) so far, reinsurers have booked four billion dollars to COVID-19 related losses.

But the aggregate loss is estimated between USD30-100 billions. This includes large scale event cancellation, trade credit & surety. It also includes general liability coverage stemming from lawsuits alleging companies for transmission & infection & workers’ compensation.

Don’t you think your decision of covering the pandemic won’t expose your firm to more claims and adversely impact underwriting surplus and operation income?
When an insurer decides to cover a risk, it should first do risk modeling and analyze the claim history. Over the past century, the world has seen only three or four pandemics with very little known impact on insurance companies. Another way is to track the loss pattern and ratio. When we look into today’s number (April 22), the total cases Vs the total tests, the world ratio is 7.81Pct and it is six percent for Africa, while it is 0.59Pct for Ethiopia.

You can compare this against motor insurance where loss ratio is over 70Pct and the market is still fighting tooth and nail for it. Hence, to provide life insurance, the risk pattern observed so far does not expose any firm. In this critical time, we need to think beyond focusing on profitable business only. This is something that gives us huge satisfaction and sense of corporate citizenship when we are professionally standing with our customers.

So, does your decision to give insurance coverage for Coronavirus apply to other pandemics?
As I said it earlier, so far, the world has seen very few pandemics (three to four). The COVID-19 pandemic is the defining global health crisis of our time. It is the greatest challenge we have faced and we have been totally unprepared for it. I am so confident, with the help of God, we can get over it.

However, I don’t think our world will ever be the same again. The world will not be surprised by such a pandemic again. Once the world recovers from this pandemic, every country and every corner of the world will be carefully assessed inch by inch. Trillions of budgets will be set aside for research and science to foresee such catastrophes. Then, the risk management & insurance for any other pandemic will be easily dealt with.

If someone wants to have a life insurance and get coverage for Coronavirus, how much would it cost?
It is very cheap. It varies with the options and coverage packages you select. Let me put it this way. If you are willing to spend the same amount you want to pay for a cup of coffee per day, you can have life insurance coverage.

Why do you think life insurance policy is not given proper attention and has a very insignificant share from total industry premium production?
A lot of studies emphasize the strong relationship between life insurance growth and the economic growth of a country. But when you come to Ethiopia, it is paradoxical to see low level of life insurance penetration despite the growing economy. In addition to the booming economy, we also have two ideal ingredients for the growth of life insurance market: large population size & growing middle class. Having these facts on the ground, the answer to your question is simple and vivid. Very little has been done so far. All our energy and resources are consumed by short term (property) insurance.

What policy changes do you recommend to increase the share of life insurance? What reforms in the insurance industry do you expect in line with the home grown economic reform agenda?
To accelerate the development of the life insurance business, a lot of tasks need to be accomplished. One of such tasks is deregulation. Deregulation, particularly easing the life insurance aspects of the regulatory frame work, is vital. This can go up to an immediate opening of the life insurance market to foreign investors. The government should also encourage national saving by availing tax incentive for life insurance. The pension fund should come to insurance. These were observed to be ideal tools to boost life insurance in other markets.

Most insurance companies are selling un-attractive & traditional life insurance products. Innovative and new products that can attract the middle class and millennials should be availed. Very little has also been done on life insurance awareness & consumer education. We need a consolidated effort from policy makers, regulators, insurers and other stakeholders.

Tell us your journey in the insurance industry. To be more specific, when did you join the insurance industry? How long have you been in Nyala Insurance?
The Mileage in my insurance journey now reads over 27 years. The ride was both pleasant and bumpy. My lifelong endeavor so far is accounted as nothing but risk management and insurance. I am able to see seven financial statements since becoming a CEO. However, my accomplishments are short of my to-do list.

What is the thing that you have not achieved during your tenure as CEO of Nyala so far?
There are many well-prepared business plans that still keep pending in my table. Our industry is full of hurdles to quickly interpret your visions. With the new economic reform plan and measures to ease the tight regulation, I have strong belief that we will be able to avail an innovative breakthrough contribution for both our company and our economy.

What is your management style?
I believe a good manager should be flexible, adaptive and appropriate for a given circumstance. I always try to make sure these traits are with me. I also like and often wear De Bono’s “six thinking hats”. It is simple but effective in critical decision-making process.

What is the reason behind the success of Nyala Insurance, even during hard times?
The primary value we built in Nyala is we are easy to do business with. We have a clear strategy and business philosophy where everyone at Nyala Insurance is aware of. We are not just insurance policy sellers. We call ourselves risk management advisors and provide not merely policy but solutions to our customers. With this, we have managed to win the confidence and trust of our customers.
If you want to thrive in insurance business, your relationship with your global partners is also critical. Our continued endeavors have helped build very strong international relationship with industry giants. This has immensely helped boost our business. The other important aspect is our continued effort for change and innovation. We don’t think outside the box, we prefer to think there is no box.

What are the characteristics that Most CEOs lack in Ethiopia?
It is very difficult to diagnose and comment what most CEOs lack in Ethiopia, but let me share you my observation. To withstand the pressure from shareholders and the media, it is undeniable that a lot of CEOs now focus on “short-termism”. It is a dangerous trade-off between short term result and sustainable long-term growth of a company.
Short term performance pressure leads to an excessive focus on yearly profit making, while little attention is paid to long term value creation and strategy. You can simply ascertain this by looking into the financial news coverage about last year’s performance. Every story was about the growth or decline of income statement items like earnings per share (EPS).

We learned very little or nothing about balance sheet items like the assets or liabilities of a company. The remarkable achievements of a company’s long-term investment like human capital development, introduction of new technology or innovative breakthroughs are often disregarded.

I would be happy if we all CEOs in Ethiopia consider that we are being paid to relieve ourselves from daily routine and focus on the big picture. Envision, map and work on our strategy where our companies reach five to 10 years from now. EBR

9th Year • Jun.16 – July.15 2020 • No. 87

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