Our approach understands insurance as a form of financial service incorporating both elements of financial services and social protection. The point of intercept is protection against risks. They manifest basically in two forms; social insurance (government schemes) or private initiatives towards risks.
2.4.1 Social Protection Services
Tanzania‘s social protection provisions are structured on three pillars which are a) Mandatory Social Insurance b) Social Assistance and c) Private insurance and voluntary Community schemes. This system implies that an individual safety net can be obtained by one or a combination of three schemes as illustrated in figure 2.1 below:-
Figure 2.1: Social Protection Services provision in Tanzania
Source: Author Individual Household Risk Protection System in Tanzania
The first pillar, Mandatory Social Insurance, covers the workers under formal employment with compulsory membership. There are six schemes17 which operate concurrently, covering different categories of employees and providing different types of benefits. The unique characteristic is that they both cover formal workers and a limited number of informal households. The major membership base comes from the formal private sector, civil servants, non-pensionable government employees, parastatal organization employees and workers working in government agencies. The law allows voluntary membership for informal sector households for all schemes. However, there is still a very limited number of informal sector households joining the program due to high contribution rates of twenty percent of monthly earnings. The schemes are financed by a tripartite system that includes state subsidies, and employers‘ and employees‘ contributions. Schemes are allowed to maintain and manage their surpluses: - and to operate as a self-funded system. The major benefits provided are based on International Labour Organization (ILO) provision of social security benefits standards, which are retirement pensions, maternity, health, death, survivors, employment injury and invalidity.
The second pillar is the social assistance system; this program is coordinated and administered by the Prime Minister‘s Office Disaster Interventions Department and Social Welfare Service Department under the ministry of youth, labour, culture and sports. These departments, in
17 This includes the National Social Security Fund , 34% target market, Parastatal Pension Fund, 7% of target market, Public Service Pension Fund, 25% of target market, Local Authority Pension Fund, 5% of the target market, Government Employees Provident Fund,
Household Individual protection
Formal Schemes
Civil Service(local and central)
PSPF/
LAPF/GEPF/NHIF
Private and State agencies
NSSF,PPF
Informal Schemes
Private insurance, social Assitance &
Voluntary Program
social Assistance, Private & voluntary
programs
collaboration with other stakeholders including domestic and foreign NGO provide services to very needy and vulnerable groups in the society. The level of services and support ranges from capacity building in knowledge and skills, to direct material support such as food aid, access to basics and essential needs, as well as small scale emergency aid, to start income generating activities. The available statistics under the ministry of labour shows the social assistance is provided primarily to persons with disability and over 900,000 persons are beneficiaries, as shown in graph 2.2 below.
Graph 2.2: Social Assistance Services Provision in Tanzania
Source: Social Welfare Department (SWD) 2009/10 Report
The third pillar, in addition to mandatory and direct government assistance, is solidarity mechanisms within the society that reduces risk for the people. In this aspect, the basic unit of risk share and diversification is the family, complemented by friends and helps from relations other non-family members. Traditional protections rooted in culture, custom and tradition are still stronger in rural areas than urban areas, though the latter have evolved new forms of mutual aid adapted to urban conditions. Table 2.4 indicates the general characteristics of a voluntary community organized in Tanzania.
0 400,000 800,000
Physical Impaired Visually impaired Hearing Impaired Intellectually Impaired Multiple Impaired Elderly with special Needs*
Childrens with Special Needs*
Other
Series1
Table 2.4: Voluntary Social Insurance Schemes Characteristics in Tanzania
Membership Founding members plus those who joined by application, payment of membership fees, some group have membership restrictions e.g.
women, religion, etc.
Insurance schedule Benefit payment is conditional on relationship of the deceased to a member
Forms of pay out In cash, In kind (food, capital goods and labour)
Rules and regulation Written rules, and book keeping, fines for non or late payment or no show in case of labour contributions
Governance structure Elected committee
Spread Large numbers of groups per community with some people belonging to several groups
Source: Social security policy report (URT 2003)
2.4.2 Access to social protection services
Social protection in Tanzania is primarily focused on workers in the formal economy, even though within the formal sector, considerable disparities exist between public workers and private sector workers in terms of benefit packages. Social assistance schemes have a number of shortcomings, as described in the ILO report of 2002; many of the potential beneficiaries were not aware of the schemes and the constraints seem to be related more to implementation and control mechanisms than to the basic concept. Schemes provide inadequate benefits because they were under budgeted;
community grants or loans were faulted, the objectives were not well understood, the government lacked an adequate administrative network; as a consequence, many target groups did not receive the benefits of the social assistance system. Closer attention to targeting, administrative control and good governance (including better coordination between ministries) could improve delivery and enable better access to benefits and services.
Informal households do not access any formal work-related measures of social protection. These suggest that the informal sector offers an important opportunity for micro insurance product demand.
Many small informal organizations are already trying to provide cover for their members, although this is often insufficient to cover the costs. Informal workers, whether self-employed or waged are excluded from contributory schemes; they may be included in social assistance schemes, such as cash transfers but these are usually designed to go to target groups of a non-working age, such as younger children, and elderly people, or those who cannot work, such as people with severe disabilities.
2.4.3 The insurance services
Insurance practice in Tanzania entails the involvement of many key players; like other financial services there are commercial insurance companies, micro finance institutions and NGO‘s. There are four categories of insurance service providers in Tanzania as shown in table 2.5 below:-
Table 2.5: Categories of Private Insurance Services in Tanzania C:1 Organization regulated
under insurance law
Commercial Insurers, Brokers/Agents and Private Health Insurance providers
C:2 Organization licensed under laws other than insurance
Micro Finance Institutions, SACCO‘s, NGO‘s, Provider based health schemes, Health insurance schemes under health authorities, Cooperative or mutual insurers (member-based) under the cooperatives authority. Banks under banking act C:3 Informal groups
(entirely unregulated)
Funeral Associations, Informal groups, Community associations
C:4 Government scheme Voluntary Community Health Funds Source: Compiled from National Insurance Reports
In the first category, the country has over 24 registered commercial insurers18, 80 broking firms, 488 licensed agents and over 36 registered loss adjusters and private health insurance providers. With the exception of one insurance company, this category does not serve informal sector households. The number of insurance service providers under this category has grown over the past five years of liberalization, as shown in Appendix B.
In the second and third categories, insurance service provision is dominated by micro finance institutions (MFI‘s), Non- Government organizations (NGO‘s) and Savings and Credit Cooperative Societies (SACCOS). MFI‘s occupy a large percentage of the provision of micro insurance, as they have extensive networks and are already offering financial services to informal household clients.
Most of the customers fall into the base of current micro finance borrowers, organized religious groups, informal communities and associations. The benefits payable to members in most cases are health and life insurance.
In category four, the Community Health Funds (CHF) were established as an alternative to access health services through being prepaid rather than out of pocket. Currently, only 29 districts out 72 have access to this program. Membership is voluntary; schemes are based on a prepaid amount
18 Zanzibar Insurance Corporation Ltd, Jubilee Insurance Co. Ltd, Tanzidia Insurance Co. Ltd, Tanzania Reinsurance Corporation, Strategies Insurance Ltd, Star General Insurance Ltd, Reliance Insurance Co. Ltd, Real Insurance (T) Ltd, Phoenix of Tanzania Assurance Ltd, Niko Insurance Co. Ltd, National Insurance Corporation, Milembe Insurance Co. Ltd, Mgen Tanzania Insurance Ltd, Maxinsure Tanzania Co. Ltd, Lion of Tanzania Insurance Co. Ltd, Insurance Group of Tanzania, Heritage Insurance Co. Ltd, Golden Crescent Assurance Ltd, Century Insurance Co. Ltd, Bumaco Insurance Co. Ltd, Alliance Life Insurance Co. Ltd, Alliance Insurance
which is determined by the local government authority. The funds are deposited in a CHF account administered by the Council Health Board. Members‘ benefits are limited to health services at the government dispensary level and are defined or are selected services at the government district level in cases of referral.
Table 2.5: Distribution of Different Micro-Insurance Schemes in Tanzania
Type of scheme No. of schemes Distribution
Health 306 7.9%
Life 1832 47.2%
Business loan 1743 44.8%
Livestock 2 ***
Property loss 1 ***
Total 3884 100
Source: (NIC 2006)
2.4.4 Access to insurance services
The TIRA19 annual report (2010) indicates that private insurance demand is growing in the formal economy, fuelled by a combination of factors, including: macroeconomic growth, on-going mineral and gas exploration which involves large investments in infrastructure, and growing trade internationally and across the region which ultimately creates demand for insurance coverage.
Government policy that obliged insurance of property served as a catalyst for the development of the insurance sector, since entities that were formerly self-insured were required to purchase insurance coverage. Furthermore, the growth of financial services, asset-based financing, such as housing and auto motors loans, leads to an increase in the demand for insurance products to mitigate the risks associated with the underlying assets. However, the report indicates that there was low access to insurance for informal households in Tanzania. The report suggests that low access was the result of delay in adopting new distribution methods and lack of public awareness.