Insurers embrace partnerships

Insurers embrace partnerships
FMHL chief executive officer, Douglas Hoto

FMHL chief executive officer, Douglas Hoto

ZIMBABWE’S insurance firms are rapidly realising that they will need to strategically partner with deep-pocketed and innovative players in the industry to stay relevant in an increasingly digital environment.
Local equities research firm, Equity Axis, said insurance firms are increasingly pooling resources to enhance competitiveness in a cutthroat market where premiums are plummeting on the back of a deteriorating economy marked by low aggregate demand,.
First Mutual Holdings Limited (FMHL) was last week given the nod by its shareholders to acquire at least 80 percent shareholding in short-term insurance firm, NicozDiamond.
FMHL chief executive officer (CEO), Douglas Hoto, said the insurance group would merge its subsidiary, Tristar Insurance with NicozDiamond as a way of preserving shareholder value.
“The integration of NicozDiamond, one of the best performing short-term insurers in the country, and Tristar will not only give us the chance to create a one-stop-shop for all insurance products but strengthen the group’s position in the insurance industry,” he said.
The FMHL boss further indicated that the acquisition of NicozDiamond would enhance economies of scale within its short term business through a large capital base, technology and a wide delivery channel.
Hoto believes that the country’s insurance sector, which has been ravaged by an accelerating economic decline, with statistics indicating that short-term insurance has a penetration rate of 2,1 percent — one of the lowest in the region — would soon rebound.
“With this merger, we are preparing for huge future opportunities when the economy comes around,” he said.
The industry’s growth is coming under increasing pressure from shrinking disposable incomes, which have been affected by company closures, high unemployment and a tightening liquidity crunch.
Companies that have survived the deteriorating operating environment have shifted focus to more pressing survival needs than paying insurance premiums.
South Africa’s insurance giant, Sanlam Emerging Markets (SEM) — a subsidiary of Sanlam — recently grabbed a significant shareholding in Zimnat which has a strong presence in short term insurance, among other insurance businesses.
The many benefits of this partnership to Zimnat include the knowledge base that the company will have access to, with over 15 000 employees and over 75 000 associates around the globe who specialise in the businesses in which we are involved.
Zimnat group chief executive officer, Mustafa Sachak, said customers can expect world class customer experience, increased technical knowledge, product development to meet changing customer needs and market conditions and great value from the company’s products.
SEM CEO, Junior Ngulube, said the insurance giant, with over $11 billion market capitalisation, was confident that the long-term fundamentals for doing business in Zimbabwe were good.
“We are optimistic about the long term prospects of Zimbabwe’s insurance industry, which is expected to register growth in 2017 and the years thereafter in both the life and non-life sectors,” he said.
“In the Zimnat group, we believe we have found a partner who shares our vision, and we will continue to work with them to grow the businesses in Zimbabwe and in the region,” Ngulube said.
A recent report by KPMG titled “The Power of Alliances,” noted that increased competitive pressure, new regulations, evolving customer demands and new technologies are creating unprecedented change in the insurance sector.
“At the same time, insurers are increasingly starting to realise that their current organisational structure and culture may not be conducive to achieving the type of real, sustainable and value-creating change and innovation needed to compete over the long-term.
“New models, new ideas and new partners must be found,” the report said.
The advisory firm noted that most insurance companies across the world are now looking for new approaches and new models that can help them drive real and sustainable value from their partnerships and alliances.
KPMG also indicated that striking a new partnership does not necessarily mean starting from scratch, but it is about learning from both traditional competitors and new disruptors.
“There is no doubt that the future will be won on the basis of the alliances, partnerships and joint ventures formed by insurance companies today. Anyone that thinks they can survive on their own in this environment is fooling themselves,” the report added.
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