Mind the gap

Baitshepi Sekgweng

Low Insurance Penetration in Botswana remains a concern

Although classed as an ‘upper middle income’ economy, the insurance gap in Botswana remains wide, deep and dangerous.

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This was the overriding feedback from the inaugural Botswana Life Insurance Symposium held in Gaborone last month, aimed at ‘Understanding and Addressing the Insurance Protection Gap (IPG)’.

The insurance protection gap, the disparity between the coverage provided by existing insurance policies and the actual financial needs of individuals and families when faced with life’s hard-hitting dramas (illness, accidents, or death) remains a concern in the local market.

Speaking at the event, Non-Bank Financial Institutions Regulatory Authority (NBFIRA) CEO, Oduetse Motshidisi said their soon-to-be-released Annual Report confirms the low level of insurance penetration in Botswana, which stands at just three percent.

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“The remedies to insurance protection gap result from concerted efforts and interventions by the insurers, the public, governments and the broader private sector and civil societies. Insurers in frontier, emerging and mature economies can narrow the gap by leveraging on technology. In mature and emerging markets, insurers invest in product innovation to narrow the gap while micro insurance can help to remedy the gap in frontier markets, especially,” said Motshidisi.

Botswana’s penetration rate remains below that of its neighbours, with the likes of Namibia, Lesotho, Zimbabwe and Mauritius averaging between 4 – 11 percent. South Africa boasts the highest penetration ratio at 12.6 percent whilst Nigeria records 0.3 percent.

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For countries beyond the continent, rated at a similar economic level to Botswana, penetration rates are between 4.8 percent and 11.4 percent in Malaysia and Singapore.

Africa’s average is 2.6 while the global rate is 7.4 percent, as of 2021.

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“The import of the statistics is that Botswana is below par in comparison to its peers, just above the continent but below the global penetration ratios. Thus, the local insurance market and other stakeholders need to find ways to close the gaps,” added Motshidisi.

According to the 2023 World Statistics Bank data, the insurance protection gap in Botswana stands at a staggering 47 percent.

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It is a gap, Botswana Life CEO, Ronald Samuels, is determined to bridge.

“The insurance protection gap represents a critical issue within the insurance industry, highlighting the disparity between the optimal insurance coverage needed and the actual coverage that individuals and businesses procure. Too often, we witness a lack of awareness leading to individuals and companies underestimating the risks they face. This gap is not merely a numerical representation; it is a stark reminder of the vulnerabilities that individuals and entities face when unforeseen adversities strike. However, let us remember that this issue transcends borders, globally, the insurance protection gap persists as a challenge, affecting financial inclusion and stability worldwide.”

In Botswana, it is thought the gap is primarily caused by issues of insurance affordability and awareness.

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