In an exciting collaboration between Minet Malawi, Britam, and The Daily Times - Malawi's leading newspaper - we are thrilled to introduce a groundbreaking initiative that will redefine your Wednesdays. Welcome to the Insurance Insights Column – a weekly rendezvous with the world of insurance and contemporary issues that matter. Every article aims to illuminate the intricate landscape of insurance products and relevant topics that impact us all. The articles will be educative at all levels, catering to both practitioners and non-practitioners.
As published in The Daily Times (Malawi) on January 17th, 2024
Welcome to the Insurance Insights column. This column has been created to discuss matters of insurance, risk management, as well as pension and employee benefits. You will agree with us that many issues and phenomena related to, or associated with, insurance and risk management go unreported or are partially reported and discussed in our country. A few cases in point: the new pension act, the impact of tropical cyclones and political violence that the country went through in recent times, the concerns about the country’s low insurance deepening and penetration ratio, the implication of changes of some provisions of the court amendment act vis-à-vis workers' compensation and third-party liability insurances. The list is long. This column will try as much as possible to discuss pertinent contemporary issues related to the above as they affect the insurance fraternity in particular and the public in general.
Risks are ever-present in our lives. Losses occur to high-income earners, low-income households, and the poor alike. Loss occurrences do not segregate between the poor and the affluent. However, whenever risks trigger our environment, the three categories named above devise coping strategies differently. The tendency for low-income households and the poor, for example, is to borrow from money lenders (katapila) or rely on the benevolence of friends and relatives. Sometimes they are forced to draw on their meager financial, physical, and social assets in order to meet the resulting loss expenses. Faced with regular financial pressures and shocks, many households resort to eroding their hard-earned income. This, in turn, results in a poverty cobweb spiral and a resulting low uptake of insurance.
You and I, as human beings, have always sought security from risks. It is the quest for security that motivated man in the early days to live together and form families, tribes, nations, and other cultural groupings.
Even today, man continues the quest to achieve security and reduce uncertainty in different sources and forms. We still rely on groups for physical and financial steadiness. The groups include one’s family, employer, and government, inter alia. The tendency is that whenever we experience a personal or national tragedy or mega loss, we either rush to seek help from friends and families or wait for the goodwill of well-wishers, the government, or the international donor community. The same concept as the one used in the pre-industrialization period applies today. The only difference is that in modern setups, man is exposed to more options and formalized financial facilities such as insurance, than in the old times.
In modern commercial systems, we are able to access formalized financial security facilities to deal with unemployment in old age (pension), death and disability (life insurance), illness (health insurance), lawsuits (liability insurance), material damage (accident insurance), bereavement (funeral insurance) and drought (agriculture insurance).
Insurance is multifactorial and has evolved over time. The earliest insurance contracts were written as part of the Code of Hammurabi. However, modern insurance practices date back to the aftermath of the great fire in London in the 1660s.
Insurance involves one party – an insurer - paying a specific pre-defined compensation in exchange for a certain up-front payment of premium by another party – the insured. Instead of relying on the benevolence of friends, relatives, and government, insurance offers an improved solution for dealing with losses and other eventualities. The insured party is certain that should an agreed risk trigger and cause death, damage, or loss, they are able to get compensation.
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