Players in the insurance sector say the industry in Malawi is still facing significant challenges, as it registered a mixed financial performance in 2023.
An unaudited financial report by the Insurance Association of Malawi indicates that in the year under review, the gross revenue for the insurance industry, which comprises eight general insurance companies, rose to K83.6 billion, an increase from K71 billion registered in 2022.
However despite the revenue growth, the industry continues to underperform as it recorded an operating loss of K2 billion in 2023, a significant rise from the K91 million loss recorded in the previous year.
In an interview with MIJ Online, Abdul Majid Dyton President of the Insurance Association of Malawi, highlighted premium undercutting among market competitors, economic pressures and fraudulent insurance claims as key factors that contributed to the industry’s poor performance in the year under review.
“Since 2022 the have been posting underwriting losses whereby the premium we are collecting from our clients is not adequate to pay for all the claims that we pay, we are not generating adequate revenue for insurance claims and management expenses. In an attempt to attract more customers, insurance companies often offered lower premiums, and this ultimately eroded profit margins. Additionally, the year was characterized by national economic pressure whereby inflation increased the cost of claims, and customers opted to take on more risks themselves rather than pay for insurance, further reducing the industry’s revenue base,” said Dyton.
According to Dyton, insurance fraud also emerged as one of the persisting challenged negatively impacting the sector, particularly in claims related to workplace injuries and motor accidents, where fraudulent activities increased the cost of claims.
For instance according to the figures, insurance claims both paid and outstanding stood at about K28 billion in 2023 a jump from K 21.4 billion paid out the previous year.
Meanwhile Dyton said the industry is implementing several measures aimed at improving its performance and fostering long-term sustainability. One such measure is the increase in premiums for selected insurance products to align their pricing with the actual risk and cost of claims, thus improving their financial resilience.
Additionally, the industry is engaging with key stakeholders such as the judiciary, police, and hospital authorities to curb insurance fraud.
“We are working closely with these entities to combat insurance fraud because at the moment about 25-30% of our payments are made to fraudulent insurance claims. Furthermore, we are implementing innovations that would lead to a reduction in operating costs and improve the industry’s financial stability, as well as looking at how best to explore available opportunities to increase insurance penetration which currently stands at less than 2%,” said Dyton.