CHALLENGES AND OPPORTUNITIES OF INSURANCE BUSINESS IN ETHIOPIA

Abstract

The insurance industry is playing an important role in Ethiopia’s economic development by promoting financial stability, reduce anxiety, substituting for government security programmes and mobilizing national savings and enabling risks to be managed. But this insurance industry has many opportunities and challenges simultaneously. The aim of this paper is to extend the line of knowledge about the current challenges and opportunities of insurance business in Ethiopia. To do so the researcher conducted an extensive review literature in the field of insurance business to identify critical challenges of the Ethiopian insurance companies to be alleviated and the current opportunities of the insurance industry to be exploited. The paper assessed the current challenges and opportunities of the insurance industry in selected three insurance companies, Ethiopian Insurance Corporation, United Insurance S.C and Lucy Insurance S.C. The primary data were collected using semi-closed ended questionnaires from directors, branch managers, and clerks of those companies. The sample size was 61 with 100% response rate. The secondary data were collected from companies’ annual reports and publications, from publications of National Bank of Ethiopia and from other related books. The findings of the paper indicate that lack of qualified insurance professionals, retaining existing customers, existing of price war among companies and increasing number of motor vehicles accidents are the current challenges of the insurance industry in Ethiopia. On the other hand the existing economic growth in the country, large number of private and government projects, high foreign direct investment and the current construction boom in the country are the opportunities for the insurance industry. Finally, the paper gives recommendations to overcome the challenges and exploit the existing opportunities of the insurance industry in Ethiopia.