• Late payments, an obstacle to the development of the sector
• The premium per head creates a shortfall of more than 40 billion
• Overdevelopment of the number of intermediaries
The inaugural conference of the first edition of the Estates General of Insurance in Burkina Faso (EGA-BF), hosted on Tuesday June 13, 2023, by Professor Filiga Michel Sawadogo, Commissioner at UEMOA, focused on the framework legal, the challenges of the insurance sector and the solutions to the difficulties facing this sector. For Professor Filiga Michel Sawadogo, insurance is a random contract which is opposed to commutative contracts in which the two objects of the contract are clear.
« While there is uncertainty when talking about random contract, such as betting game or lottery, considered as the main random contract in the world », says the speaker. It is this state of affairs that contributes to making practices in the field much more complex. The insurance contract and the insurance company are governed by the treaty and the CIMA Code in force respectively in 1992 and 1995. These legal provisions aim, according to the speaker, to protect the insurance sector from difficulties.
One of the main features of the CIMA Code is the scales of claims compensation benefits. A barémisassions saluteyea, according to Professor Sawadogo, who considers that without the latter, there might not be any insurance company in the sub-region because ofthe convictions that could be very abusive to a company. « This reform was salutary, because before its adoption, there were several cases of liquidation of insurance companies »he points out.
The speaker recalled that the Burkinabè insurance market was very dynamic and ranked fourth in the CIMA zone.
« Despite the progress made, he argues, the insurance sector has some shortcomings, such as the low penetration rate and the payment of claims, there are also governance rules for insurance companies which have shortcomings and which are in out of step with the realities of better performing markets ». He then pointed out that the delays in the payment of claims, which have certainly improved, still remain a concern and sometimes even lead to non-payment.
Other challenges such as non-compliance with regulated tariffs for compulsory insurance, poor development and positioning strategy of insurance companies, insufficient knowledge of competition regulations by professional associations, local non-insurance of major risks , the unsuitability of marketed products, where the agricultural sector is insufficiently covered, the informal sector and the youth neglected, etc. caught the attention of Professor Sawadogo.
Following it, the firm FINACTU, which carried out a clear diagnosis of the sector at the request of the organizers of the EGA-BF, pointed out that the sector was still dominated by the non-life segment and that there was significant untapped potential. Indeed, underlines the report of the Cabinet, when one looks at the density which is the premium per capita, the unexploited potential still remains important. “Burkina has a per capita premium of 6,000. Compared to a level that reaches 8,000 on average in the CIMA zone, there is a potential reaching more than 40 billion FCFA that can be released, with an equally important fiscal impact,” he underlines. He adds that there is also untapped potential due to non-compliance with compulsory insurances. In this segment, the untapped potential is around 27 billion, of which 17 billion in cars and 10 billion in two- and three-wheeled vehicles.
As solutions, Professor Filiga Michel Sawadogo proposes the digitization of insurance services to solve the problem of speed in the settlement of claims and the strengthening of the financial, material and management autonomy of the National Insurance Directorate. It also proposes to ensure the harmonization of certain tariffs, as well as the development of banking insurance, to initiate institutional reforms by creating instruments to regulate the network of intermediaries, in order to make them more efficient.
Indeed, for the firm FINACTU, there is a plethora of intermediaries which has exploded in recent years.
For the firm FINACTU then, it is necessary to improve the quality of compensation to improve the image of the insurance sector among the insured and thus allow a strong penetration of insurance among the populations. Finally, he calls for an improvement of the tax framework, which, according to him, includes aspects that are not very favorable to the development of the sector.
This is the case, for example, of the taxation of life insurance products at IRT and IRTM. According to FINACTU, in developed countries, this tax is reduced to around 15% or completely exempt.
The President of the Professional Association of Insurance Companies of Burkina, Monhamed Compaoré, recalled that the Estates General of Insurance had undertaken to examine all of these challenges in order to unleash the economy’s full potential for the insurance sector in Burkina Faso. o
Etienne LANKOANDE (Associate)
