A multimillion birr insurance coverage that will boost the life class of business embarks through a tripartite deal between financial firms.
The new scheme which is a premium financing scheme was introduced by Nib International Bank, Nib Insurance Company and Gasha Commission Agent plc and is set to provide affordable insurance coverage for public transport providers.
The initiative that was developed by Gasha and accepted by the two Nibs shall include thousands of vehicles to be included on its insurance coverage and shall also provide life insurance for the customers.
It is stated that the inclusion of the life class of business is a game changer for the insurance industry in general since the life business is very small in Ethiopia against the experience for other countries.
At the tripartite agreement and lunching ceremony held on Thursday December 9 at the head quarter of Nib International Bank, Belay Tulu, Director for Insurance Supervision Directorate at National Bank of Ethiopia (NBE), described the initiative that shall boost the life business.
Yonas Belay, Business Development and Planning Manager at Nib Insurance, told Capital that under the new scheme thousands of vehicles engaged on public transport will be included, while the premium will be covered by the bank and customers shall settle their duty at the bank every day on the platform that is established for the scheme.
He explained that the scheme would be key for financial inclusion since it includes several individuals who were not included in the insurance coverage, “we provide insurance coverage, the bank provide the finance in advance and customers who will have account at the banking are saving for their insurance coverage in every day manner, which is boosting saving.”
Yonas said that the new scheme is a game changer in the industry that is worth hundreds of millions of birr.
Zufan Abebe, President of Nib Insurance, said that the insurance company that has half a billion birr paid up capital has established a dedicate branch to manage the new coverage that shall manage thousands of customers.
Yonas explained that the insurance company has fully prepared to manage the new operation in terms of officers and office.
“We have ample capacity to serve the crowd that is expected to come under the new insurance coverage,” he added.
Abel Hailemariam, owner and CEO of Gasha, which is a financial focused company, said that his company has been engaged in detail study on how the cars, mainly public services provides to be included on the insurance coverage that is ill on the sector compared with other insurance businesses.
He said insurers are not interested to play with motor insurance particularly on vehicles with high mobility like minibus and small taxes since they are highly vulnerable to accidents which directly affects the income of insurance companies, “due to that, they impose huge amounts of rate as a premium for such vehicles that is unaffordable and discouraging for car owners.”
“Besides that as per the business experience in the country to be insured clients have to pay yearly insurance coverage and besides that according to the NBE, the regulatory body, directive advance payment of premium is a must, which narrows the loophole to come up with credit alternatives on the sector,” the CEO explained.
On the new scheme Gasha is coming with the idea that the bank will settle the premium on behalf of vehicles in advance and vehicle owners shall re pay on daily basis.
“Most of the stated type of vehicles is excluded from insurance coverage except the mandatory third party insurance, while most of such kinds of cars are major source of income for drivers, owners or their family,” Abel says, adding, “but these assets that may be bought after long saving or by families for their children to support their life and at the same time economic pillars and job for many Ethiopians are endanger.”
“If any accident and damage occurred on a single car the effect is very massive for those, whose life is dependent on it, due to that insurance coverage is a must,” he elaborate showing the reason why the new scheme was introduced on car owner’s side.
On the other hand, the source of finance for the insurance coverage that will be hundreds of millions of birr shall be supported by financial firms, who are willing to be part of the idea.
According to the plan, a bank shall cover a premium of many cars for the insurer, while beneficiaries would resettle their payment on daily bases through the bank account that they opened on the bank, which paid for their premium in advance.
The study indicated that to cover the annual premium the maximum daily payment amount for a vehicle, which is mainly engaged on daily income, as 45 birr.
On this scheme Nib Bank shall easily expand the customers base, saving, other banking services. “Beyond interest earning bank customer base will be massive because of the scheme,” the study indicates.
“For insurers it can be expressed by a single word; bonanza. As per our study for instance if an insurer covers 10,000 vehicles under this scheme the premium would be 125 million birr or if the number of cars shall be 25, 000 the amount of premium is over 312 million birr,” the CEO explained.
“Insurer shall manage this with a single poll and since the poll includes huge customers their benefit also is very significant,” he added.
Gasha will benefit as a facilitator on service charges.
For vehicle owners they will be safe from any risk, and shall settle their premium in long term arrangement, “while the major benefit of car owners would be that they enable to use their assets to access finance.”
“Insurance coverage is a must to access finance from may be banks or micro finances, meanwhile at the current stage such kind of vehicle owners have neglected to make their cars as collateral because of the insurance issue,” Abel cited the current condition as he explained how the new scheme will empower them to access finance.