The Ethiopian Insurance Association has requested permission from the National Bank of Ethiopia to enable a system to share credit information amongst insurance companies.

The insurance companies have need of such a system to check if clients are in debt to other insurers so as to help with the 1.7 billion birr of uncollected debt currently weighing down the industry. The association is proposing to collect the debt collectively owed to the sector within two years.

It is to be remembered that Ethiopia’s newly ratified ‘Insurance Business’ proclamation has made several changes to how the industry operates. The new proclamation prohibits insurance companies from providing policy coverage on credit according to a notification issued by the national bank in a circular signed by Temesgen Zeleke, Director of the Insurance Division Directorate at NBE. The particular change will require immediate action by the insurance companies according to a contract administration manger for an insurance company.

The National bank is requiring insurance companies to collect outstanding credit and to prepare policies on a cash basis alone going forward said Temesgen.

The no credit rule will be beneficial to both the insurance companies and the central bank as it eliminates the need for exerting effort and committing resources towards collecting outstanding money while the central bank will receive the full due its owed in such exchanges said according to Meseret Bezabih, General Manger of United Insurance.

Source: Fortune