Interview: Hassène Feki
How should Tunisia’s new insurance code be reformed to modernise the sector?
HASSÈNE FEKI: With more than 20 insurance companies, the sector is saturated with too many actors for such a small market. The industry needs to be consolidated through more rigorous regulation that establishes stricter solvability rules for companies.
While writing the new insurance code, the General Insurance Committee should take inspiration from the EU’s Solvency II Directive of 2009, whose first pillar requires a solvency capital minimum for companies based on the composition of their portfolio. Such a pillar would encourage the consolidation of the sector. The second pillar sets out requirements for the governance and risk management of insurers, which are also necessary. However, these requirements should be applied strategically in order to not make the regulation overly bureaucratic. The third pillar, which focuses on reporting for disclosure and transparency requirements, is heavy in certain European companies, where reporting adds necessary value. Although the third pillar would help the Tunisian authorities enforce laws, reporting should not be severe.
Furthermore, in order to modernise the sector, digitalisation needs to be encouraged. Consumer habits are changing and there are numerous new technologies available that offer better customer service. Big data could be used to improve risk analysis and better price coverage. Insurers need to adapt to these changing trends and regulation should also follow.
To what extent should car insurance prices be liberalised in the coming years?
FEKI: The fact that automobile insurance rates are fixed is a hindrance to the development of the sector, as everyone pays the same and there is no differentiation between good and bad risk. The frequency of physical injuries caused by car accidents does not diminish and there are around 1500 deaths per year.
Insurance rates must be segmented and liberalised so that companies can establish scientific approaches to pricing. Currently, car insurance is unprofitable as a result of the fixed rates, and many companies take long periods of time to pay for damages. This produces a negative image of the sector and impedes customers from looking for other types of coverage.
What other products do you think have the most potential in the country’s market?
FEKI: Comprehensive, or multi-peril, insurance products offer significant potential in the national coverage market; in particular, multi-risk home and professional multi-risk insurance policies could be further developed in the short term.
Currently, multi-risk home insurance has a low penetration rate at 2%, but new risks such as climate change and possible housing damage from natural disasters increase people’s demand for this type of coverage. However, Tunisians are uninformed of this type of product and they do not realise that the prices for comprehensive homeowners’ policies are relatively low: for medium coverage, the premium is around TD100 (€38) per year. Therefore, it is necessary to leverage insurance sellers and their networks to raise awareness of multi-risk home insurance, especially in the interior of the country, where purchasing power is low and this product has a high cost-benefit.
Furthermore, Tunisia has a prominent ecosystem of small and medium-sized enterprises (SMEs) that are for the most part uninsured, thus professional multi-risk insurance also presents an interesting product for the market. In this regard, companies should develop innovative products offering the best coverage for SMEs. However, SMEs need to be better informed on the risks they run, and on how to cover their businesses. Professional associations and chambers of commerce could serve as strategic platforms to shed light on new insurance products for SMEs.
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