A new draft insurance proclamation has been submitted to the Ethiopian Cabinet. The draft is significant overhaul of the active insurance directive in Ethiopia, the Insurance Proclamation of 1994.
Notable changes that would be put into effect by the new proclamation include a restriction of individual and family shareholding in the sector to 5% and a termination of credit services for customers with the exception of government bodies.The new proclamation has been in the works for many years with insurance companies asked for their input as long ago as 2008 according to sources within the insurance sector.
The insurance sector welcomes the termination of insurance policies on partial or full credit basis according to experts.
The risks involved with covering insurance on credit have been a burden for the insurance sector and the National Bank of Ethiopia according to Meseret Bezabih, General Manager of United Insurance.
Insurers spend significant amounts of resources on collection including employing collectors and spending valuable man hours and money on phone and physical attempts to collect she said.
The draft of the new proclamation allows for the National Bank to include other parties eligible for credit services in addition to government bodies after it is ratified.
The exemption already offered to government bodies gives the state owned Ethiopian Insurance Company a clear advantage as government insurance primarily goes through the EIC argued Meseret against the exemptions.
The 5% shareholding limits set on the insurance sector are similar to restrictions on the banking sector. The restriction may be a bit limiting for the insurance sector, however as it does not see as much interest as banking according to a legal expert.
It is expected that the paid-up capital for insurance companies will raised if the draft is passed.
Source: Addis Fortune