What are the challenges the insurance industry is facing? i.

Some cultural practices and beliefs which are not in tune with the current economic realities. ii. iii. iv. v. Poor economic growth. This has led to high poverty levels hence low purchasing power. Lack of knowledge and appreciation of the role of insurance by the public. Ignorance. Many people don't think insurance is beneficial to them. Negative image of the industry caused by unethical practices by some agents and other market players. vi. vii. No insurer is large, except in a local context, and there are few actual economies of scale. Past restrictions and a generally challenging business environment in a small economy have limited the involvement of foreign insurers. viii. ix. Poverty and lack of awareness appear to be major constraints. State-owned enterprises, potentially substantial users of insurance, have financial problems. x. xi. xii. HIV/AIDS limits the potential for health insurance and life insurance. Insurers have been overly dependent on traditional products and distribution channels According to the Insurance Regulatory Authority, fraud and corruption have been significant problems. xiii. The regulatory structure has limited the sales of micro-insurance and this needs to be rectified. xiv. Maintaining Funds in Hard Economic Times Price Waterhouse Coopers stated that instead of seeing collapsing assets, insurance companies have to deal with problems relating to collapses in hedge funds, structured securities and equities, according to the company's "Top Nine Insurance Industry Issues in 2009" publication. As a result, credit markets seized, sales in life insurance policies dropped, asset management fees lowered and bond and mortgage insurers lost significant amounts of capital. In an effort to hold on to whatever funds they have, insurance companies are doing what they can to

deny claims, pay less in settlements and defend their claim decisions in court, a battle that can take several years, according to a 2007 CNN article. Solvency Companies that offered whole and term life insurance began offering "marketsensitive" products in an effort to expand product portfolios, according to Price Waterhouse Coopers. This gave policyholders competitive returns and gave insurance companies an edge in the financial service market. Consequently, reserve calculations are subjective, more complex and the investment portfolios require more attention in order to manage them so returns and cash flow align with future liabilities. Market sensitive products that involve long- and short-term investments for companies that sell life insurance are seeing low returns. As a result, insurance companies need to look at other avenues to ensure solvency and increase retention efforts. Reducing Costs Cost cutting efforts can have devastating consequences to insurance companies, but is an issue they face in an effort gain capital. Insurance companies, as they determine which costs to cut, must look at forces behind costs. This helps them ensure a cut in one area does not increase the cost in another, which can make an insurance company less competitive. For example, cutting employee benefits reduces employee retention, or cuts in staff can lead to long turn-around times. Financial Web states that as insurance company costs increase, their capital decreases. Additionally, insurance companies face difficulties when it comes to creating improvement plans that reduce costs when the plans lack a basis in resources, priorities, dependencies and the integration of the human element, such as training, communication and performance management.