Economic ExpertSpeak: Mauritius insurance reeling under unfair competition
Abdel Ruhomutally, Managing Director, GFA Insurance, spoke to AfricaMoney on how the Mauritius-based insurance major is striving to make insurance an easy-to-buy service, and take out all the complexity that prevents people from enjoying the benefits of a good insurance cover. (Image: Company)
Abdel Ruhomutally, Managing Director, GFA Insurance, spoke to AfricaMoney on how the Mauritius-based insurance major is constantly leveraging technology to make financial services more accessible to all client segments and was the first insurance company to offer online credit card payment facilities. However, our economic expert noted that the local insurance industry is plagued by unfair competition and unethical business practices. He expressed great concern over certain unhealthy pricing practices in the general insurance industry and added that there is much to do to create a level-playing field.
Edited excerpts from an exclusive interview:
What were the major achievements of GFA in 2013?
Our biggest achievement is that our assets exceeded the Rs 500 million-mark, which we set as target for 2014 but were able to achieve a year earlier.
On the other hand, despite indecisive economic conditions, we posted record profits of Rs 62 million for the company and Rs 93 million for the group. We are growing amidst the challenging business environment thanks to skillful leadership, management and business development.
How has your company worked to transform the insurance market in Mauritius?
GFA Insurance has always been at the forefront of innovation. In 2009, we launched our online service iPAY. In fact, we are the first insurance company to have offered online credit card payment facilities to its customers. We also innovate in terms of products and introduced a special insurance policy for electronic products, Electrix.
We bring innovation to the industry in view to deliver enhanced customer value. We do not believe in engaging in a price war to face competition. We are helping the industry to grow with new products, services and processes.
Customers need effective insurance solutions at affordable rates and a good service. We continuously innovate to make us stay relevant in the face of this reality. We expect our competitors to do the same for the benefit of customers and of the industry. But, we also fight for a fairer and a more level-playing field market.
The industry, unfortunately, has a sad history of unfair competitive practices that hurt operators like GFA Insurance. We have been fighting this battle for many years. We have seen some progress, but a lot remains to be done. Yet, our commitment to fight for a fairer marketplace remains unwavering.
Thanks to our advocacy and lobbying, we have secured a clause in the Insurance Act (Section 81) that would safeguard the free choice of customers when subscribing to an insurance policy.
A fairer marketplace encourages service providers to adopt new technologies, bring new products and services and develop new channels to serve customers.
In what ways does the separation of general insurance and life insurance help in protecting the interests and investments of the public?
The separation of the two business lines is a fundamental element of the new insurance legal framework. This is meant to protect the interests of the customer against irregular practices and bad governance. The regulator and government wanted to make sure that premiums from life policies that are mainly long-term investments are not used to fund the short-term liabilities of general insurance, such as automobile insurance, fire, medical covers, etc.
Such practices were a serious threat to the stability of the insurance industry and endangered interests of clients.
The most appropriate way to prevent this from happening is to put an end to the existence of composite insurance companies, i.e. companies doing both life and general insurance business. With the new law, life and general business must be carried out by separate entities.
GFA Insurance won the Mauritius Business Excellence Awards twice, in the category of Leadership in 2010 and for Sales and Marketing in 2011. To what initiatives do you credit these awards?
As I said, we stress a lot on innovation. We continuously deliver customer value through effective and affordable products and customer-focused service. Our employees are our greatest assets, and we spare no effort to build our human capital. We invest massively in training and professional development so that our employees endorse our vision and meet our endeavour for high quality service. The company has put in place the right systems and procedures in sync with this vision.
In 2004, we won the MIM/MEF/AHRP Training Commitment Award and the HRDC HR Commitment Award in 2011. These awards are proof of our commitment and actions to develop the business whilst delivering more opportunities for unique customer experience. We have a culture of strong leadership supported by robust governance and accountability that encourages and rewards initiative and hard work.
GFA was the first insurance company to offer on-line credit card payment facilities called iPAY in 2009. How is this initiative going on?
The system is working beautifully and we are particularly proud of our achievement. We are always bringing more convenient service to our customers. People find it really handy to make payments on-line using their credit cards. The number of clients using this facility has kept growing. We are leveraging technology to make financial services more accessible to all segments of our clientele. We want to make insurance an easy-to-buy service, and take out all the complexity that prevents people from enjoying the benefits of a good insurance cover.It also enables the company exploit an efficient channel and helps improve its cash flow as late payments are significantly reduced. iPAY is a landmark achievement for GFA Insurance.
According to financial highlights for 2013, GFA Insurance had a turnover of Rs 162 million for the year, representing a 4.5% increase over 2012. Can-you comment on the financials in light of this statement?
Our turnover has not been growing that much, but our profits before tax jumped 88% to Rs 62M. This underscores a prudent underwriting policy. We are very selective about taking on new clients. Our objective is to sustain a sound business growth with focus on profitability and shareholder value.
As I said earlier, we are not interested in slashing our rates just to increase our turnover. We believe in a prudent management of our business and stay away from risky clients. With a very comfortable 38% profitability rate, we do not feel the need to enter in a price war to maintain market share. Similarly, our solvency margins are very strong; In fact, we have one of the highest solvency ratios in the industry. This allows us to meet all our financial commitments, including insurance claims, in time.
We adopt a very conservative dividend distribution policy. A large portion of earnings is retained and reinvested in the business to reinforce our financial muscle and develop new products and processes.
What are your expectations for 2014?
2014 has been a landmark year for GFA Insurance as we made a number of key changes at the leadership level. Former Managing Director Mr Alaoud Ruhomutally has since 1 January 2014 taken over as Non-Executive Chairman of the Board of Directors. Dr Raouf Ruhomutally has decided to step down after having served for 17 years as Company Chairman. In the process, I was promoted to the position of Managing Director from Deputy-Managing Director.
Thanks to a well-thought out succession planning, the changes both at Board level and at Senior Management Executives levels are working smoothly. Our priority for 2014 is to make sure that the changes are going ahead as per plan, and that a climate of serenity in the company prevails. We have a lot of projects in the pipeline, and we are going to have them executed in a near future with the new leadership at the helm.
Finally, could you please provide your views on the insurance landscape in Mauritius?
The insurance industry is plagued by unfair competition, unethical as well as unfair business practices. There is a lot to do to come to a level-playing field. GFA Insurance is at the forefront of the battle for greater fairness and integrity in the industry.
We are equally very concerned by some pricing practices in the general insurance industry. Some operators are slashing rates to levels deemed as unhealthy only to maintain market share. This is extremely harmful to the industry and threatens its financial stability.
GFA Insurance wants to grow with innovation and through expanding market space. We are always ahead of the curve, which helps us anticipate demand for new products and explore new markets.