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By Andualem Sisay - Capital
29 May, 2007
Ethio-Life Insurance Share Company, is underway to introduce specialized long-term insurance, being the first of its kind in the country’s history.
Being a specialized long-term insurance company engaged in life, the company is planning to begin with introducing life insurance this September and aims to include health and pension insurances later on. “Modernization, the development of the private sector in Ethiopia, the shift of urban people from dependency on extended families to nucleus ones are among the indications that show us the need for a specialized long-term life insurance,” said Teshome Beyene, project Coordinator of the company, on the press briefing held at the Hilton Hotel on Friday, May 25, 2007.
The company will join the industry with an authorized capital of 50 mln birr and subscribed and paid-up capital of 8 mln birr. The company is currently finalizing selling 8,000 shares with 1,000 birr for each share and 30 shares as a minimum share for one buyer. The company projects to sell 30 to 40 mln birr worth of shares in the coming three years. The minimum subscription and paid-up capital requirement to establish an insurance company in Ethiopia is 4 mln birr.
“The reason why life insurance has not grown in Ethiopia so far is because it was not treated and promoted separately,” says Mohamed Hussein, conceiver of the idea and a share holder of Ethio-life Insurance Share Company. “Besides, there are only few experts in the field in the country and it needs visionary investors, who are patient to grasp a long-term return.”
Critics mention the nation-wide usage of traditional social security systems such as Edir, Ekub and the like as the main reason for the slow growth of life insurance in Ethiopia. According to Teshome, one can not be an obstacle to the growth of the other since there is a chance for these institutions and life insurance to coexist by supporting each other. He also described that the company is undertaking a study on how both can work together effectively.
“The potential for long-term insurance in Ethiopia is huge yet untapped,” Teshome said. “The contribution of life insurance is a mere slice of the total insurance sales in the country, which is only 5-6 per cent as compared to Kenya’s 30.5 and Egypt’s 39.5 per cent. On a different scale of measure, the per capital expenditure per annum on long term insurance is about sixty cents making Ethiopia among the least penetrated countries in the world.”
Mentioning India’s 80.6 per cent of life insurance share of the total insurance share in the country and the global mystification, which says life insurance is only for the rich people, Teshome stressed that life insurance is more viable for the poor than the rich.
Though there was a failed attempt to introduce specialized life insurance in Ethiopia by a company named Ethio-American Life Company some 40 years ago, from then onwards, there was no other company who tried to fully be engaged in providing only life insurance in Ethiopia.
Currently, there are nine companies in Ethiopia are engaged in general insurance service, including life insurance.