INTRODUCTION

The insurance industry in Tanzania has been growing steadily in recent years. According to the
Tanzania Insurance Regulatory Authority (TIRA), the industry grew by 7.9% in 2019, generating a
premium income of TZS 733.5 billion (approximately USD 318 million).
The insurance sector in Tanzania is divided into three main categories: life insurance, non-life
insurance, and reinsurance. Non-life insurance dominates the market, accounting for around 80% of
the total premium generated. The main types of non-life insurance products in Tanzania include
motor vehicle insurance, health insurance, fire and allied perils insurance, and marine insurance.

The market environment of the insurance sector in Tanzania is influenced by various external
factors. Porter's Five Forces model can be used to analyze the competitive landscape of the industry.
The bargaining power of buyers is relatively low due to the limited options available in the market.
The bargaining power of suppliers is also low, as there are several players in the market that insurers
can choose from. The threat of new entrants is moderate, as there are still opportunities for new
players to enter the market. However, the high capital requirements and regulatory barriers can
make it challenging for new entrants to establish themselves. The threat of substitutes is low, as
insurance is still not widely used in Tanzania. Finally, competitive rivalry is high, as there are several
players in the market competing for market share.

In recent years, the Tanzanian government has taken steps to improve the regulatory environment
for the insurance sector. The Insurance Act of 2009 introduced new provisions to regulate insurance
intermediaries and improve consumer protection. Additionally, TIRA has increased its efforts to
enforce compliance with regulatory requirements and improve the transparency and accountability
of insurers. The Tanzanian government has made several efforts to improve insurance penetration in
the country. Some of the key initiatives include:
 Financial education: The government has recognized the importance of financial education
in promoting insurance penetration in Tanzania. The Tanzania Insurance Regulatory
Authority (TIRA) has partnered with various stakeholders, including the Ministry of
Education, to integrate financial literacy into the national curriculum. The government has
also worked with non-governmental organizations (NGOs) and microfinance institutions to
provide financial education to underserved communities.
 Regulatory reforms: The government has introduced several regulatory reforms aimed at
improving the transparency, accountability, and consumer protection in the insurance
sector. The Insurance Act of 2009 introduced new provisions to regulate insurance
intermediaries and improve the handling of claims by insurers. The The government has also
introduced regulations to promote microinsurance, which is aimed at providing insurance
services to low-income individuals and microenterprises.
 Promotion of mobile insurance: The government has encouraged the use of mobile
technology to promote insurance penetration in Tanzania. The government has partnered
with mobile network operators to offer mobile insurance products, which can be accessed
by customers through their mobile phones. This has made insurance more accessible and
affordable to low-income individuals and those living in remote areas.
 Public awareness campaigns: The government has launched public awareness campaigns
aimed at promoting insurance services in the country. For example, TIRA has launched a
campaign to educate the public on the benefits of insurance and the risks of not having
insurance. The campaign includes radio and television advertisements, as well as public
seminars and workshops.
These initiatives have helped to improve insurance penetration in Tanzania, although there is still
significant room for growth. With continued support from the government and the adoption of new
technologies and distribution channels, there is potential for the insurance sector to make a greater
contribution to the economic development of Tanzania.
There are currently 31 insurance companies operating in Tanzania, offering a range of insurance
products including life, health, motor, and property insurance. The majority of these companies are
domestically owned, with only a few foreign-owned insurance companies operating in the market.
Life insurance is the largest segment of the market, accounting for approximately 52% of the total
premium income in 2019. The second-largest segment is general insurance, which includes motor,
property, and liability insurance.
The penetration rate of insurance in Tanzania remains low, with only about 1% of the population
covered by insurance. However, the government has recognized the importance of insurance and
has taken steps to increase awareness and encourage uptake of insurance products. In 2016, the
government launched the Tanzania Insurance Regulatory Authority Strategic Plan (2016-2021),
which aims to increase insurance penetration to 3% by 2020.
The reasons for their penetration to be low compared to other countries in africa may due to
 Low awareness and understanding of insurance: Many Tanzanians have limited knowledge
and understanding of insurance and its benefits. This makes it challenging for insurers to
educate potential customers and encourage them to purchase insurance products
 Low trust in insurance providers: Some Tanzanians view insurance providers as
untrustworthy and reluctant to pay out claims. This lack of trust can discourage potential
customers from purchasing insurance products.
 Low disposable income: Many Tanzanians have low incomes, which makes it challenging for
them to afford insurance premiums. This limits the market potential for insurers, particularly
for higher-value products such as life insurance.
 Limited distribution channels: The insurance sector in Tanzania primarily relies on traditional
distribution channels, such as agents and brokers.
Porter's Five Forces model can be used to analyze the market environment of the insurance sector in
Tanzania and how it affects insurance provision. The five forces are:
1. Threat of new entrants: The insurance market in Tanzania is open to new players, but there
are significant barriers to entry, such as the high cost of capital and the need for extensive
regulatory compliance. As a result, the threat of new entrants is relatively low, and
established players have a competitive advantage . New entrants must also build
relationships with reinsurance companies, which are often international firms that have
strict requirements for doing business. The cost of building an insurance company from
scratch is high, and this makes it difficult for new players to enter the market.

The threat of new entrants is impacting the provision of insurance services in Tanzania in several
ways:
it increases Competition: The insurance industry in Tanzania is becoming more competitive,
with new players entering the market. This is putting pressure on established insurance
companies to differentiate their products and services, improve their customer service, and
reduce their costs to remain competitive. This competition is ultimately beneficial for
consumers, as it leads to a wider range of products and services, and potentially lower prices.

It promotes Innovation: The entry of new players is also driving innovation in the insurance
industry in Tanzania. New entrants may bring new ideas, technologies, and business models that
challenge established players and force them to adapt. This can lead to the development of new
and innovative insurance products and services that better meet the needs of consumers.

It increases Pressure on existing players: The entry of new players can put pressure on existing
insurance companies to improve their products and services or risk losing market share. This can
lead to increased investment in technology, staff training, and marketing, all of which can
benefit consumers. However, it can also create challenges for established players who may
struggle to adapt to new market conditions. therefore, the threat of new entrants is having a
 significant impact on the provision of insurance services in Tanzania. While it creates challenges
for established players, it also leads to increased competition, innovation, and better outcomes
for consumers.

Examples from the contemporary real cases in tanzania is the emergence of insurtech
companies These are companies that leverage technology to provide innovative insurance
products and services that challenge established players in the industry Some examples of
Insurtech companies operating in Tanzania include BimaAfya, Vodacom Insurance, and
MobiHealth. This has put pressure on established insurance companies in Tanzania to improve
their digital capabilities and develop new products that cater to the needs of a changing market.
It has also led to increased competition in the industry, with Insurtech companies competing for
the same customers as traditional insurers. it also presents opportunities for innovation,
collaboration, and better outcomes for consumers.

2. Threat of substitutes: In Tanzania, there are limited substitutes for insurance products, such
as self-insurance or relying on traditional forms of risk mitigation. However, these options
are not as effective or reliable as insurance products, and insurance companies have an
opportunity to increase penetration by educating consumers on the benefits of insurance.
This threat is typically low in the insurance industry, as insurance products are unique in that
they provide a form of financial protection that cannot be easily replicated by other products
or services.

The threat of substitutes is impacting the provision of insurance services in Tanzania in the
following ways
through the emergence of new, non-traditional insurance providers, such as peer-to-peer (P2P)
insurance platforms or mobile-based insurance services. These new providers may offer
innovative insurance products or use technology to provide insurance in new ways, potentially
disrupting traditional insurance providers. For example, some P2P insurance platforms allow
users to pool their resources to provide coverage for specific risks, such as car accidents or travel
delays.
changes in customer behavior or preferences. For example, if customers increasingly prefer to
self-insure by setting aside funds in a savings account or investing in alternative financial
products, the demand for traditional insurance products could decline. Alternatively, if
customers begin to demand insurance products that are more closely aligned with their values,
such as insurance that incentivizes healthy behaviors or reduces carbon emissions, traditional
insurance providers may need to adapt in order to remain competitive.

Examples from contemporary real cases in tanzania

There are several companies in Tanzania that are leveraging insurtech to innovate and differentiate
themselves in the market. Some examples include: BimaAfya: is a mobile-based health insurance
platform that provides affordable health insurance to low-income individuals and families in
Tanzania. The platform allows users to sign up for insurance coverage using their mobile phones and
provides access to a network of healthcare providers across the country.

Jamii Africa is a mobile-based insurance platform that provides low-cost insurance products to
individuals and small businesses in Tanzania. The platform uses mobile money to facilitate premium
payments and claims processing, making it easier for customers to access insurance products and
services.
These companies are using insurtech to overcome the challenges posed by traditional insurance
models in Tanzania, including high costs, low penetration rates, and limited access to insurance
products and services they use the technology to innovate themselves.
 3. Bargaining power of suppliers: Insurance companies in Tanzania rely on a variety of
suppliers, such as reinsurers, brokers, and IT providers. The bargaining power of suppliers is
relatively high, as there are limited number of suppliers in the market and their services are
critical to the operations of insurance companies. Reinsurance companies have a significant
impact on the cost of insurance products, and there are few local reinsurance providers in
Tanzania, which makes the market less competitive. Brokers provide access to customers,
and IT providers are essential for the efficient operation of insurance companies. As a result,
suppliers have bargaining power over insurance companies. Examples of reinsurance
companies are Zanzibar Insurance Cooperation (ZIC)

Suppliers who offer innovative and high-quality products and services can help improve the
efficiency and effectiveness of insurance companies, which can lead to lower costs and increased
customer satisfaction. For example, suppliers of advanced technology solutions can help insurance
companies streamline their operations and offer more personalized services to their customers,
which can ultimately drive growth and support the overall economy.

the bargaining power of suppliers is an important factor to consider in the insurance sector and in
the broader economy, and effective supplier management strategies can-help maximize the benefits
of these important stakeholders while minimizing risks and costs for businesses and customers alike.
Their contribution to the economy is significant, as they help to create jobs, promote innovation, and
support the growth of the insurance sector.

Therefore, the bargaining power of suppliers in the insurance industry in Tanzania can have a
significant impact on the provision of insurance services. Insurance companies need to manage
these factors effectively to ensure that they can provide affordable and accessible insurance
products to consumers. Thus the bargaining power should be well adhered so that the insurance
sector can speed up the growth in tanzania.

The way the bargaining power of supplier is shaping the provision of insurance services is by ;
Through the availability of skilled labour Insurance companies require skilled professionals such as
actuaries, underwriters, and claims handlers in order to provide their services. The supply of such
professionals may be limited, particularly in smaller markets such as Tanzania, which may increase
the bargaining power of suppliers such as recruitment agencies and training institutions In such
cases, insurance companies may need to pay higher wages or invest in training programs to attract
and retain skilled professionals.
through the availability of technology and data. Insurance companies require technology such as
software systems and data analytics tools to underwrite policies, manage claims, and assess risk. The
The availability and cost of such technology can affect the bargaining power of suppliers such as
software vendors and data providers. In some cases, insurance companies may need to invest in
their own technology or develop partnerships with suppliers to ensure they have access to the
necessary technology and data.
Through the availability of reinsurance companies can also shape the provision of insurance in
tanzania Reinsurance companies provide insurance to insurance companies, allowing them to spread
their risk and protect themselves against large losses. The availability and cost of reinsurance can
affect the bargaining power of insurance companies, particularly smaller ones. In some cases,
smaller insurance companies may struggle to find affordable reinsurance coverage, which can limit
their ability to offer certain types of policies or expand their business.
Examples from contemporary real cases from tanzania
The insurance sector in Tanzania is heavily dependent on the banking sector for distribution. Banks
act as intermediaries for insurance products and earn commissions for selling insurance policies on
behalf of insurers. This has given banks significant bargaining power over insurers, as they control
the distribution channels for insurance products. As a result, insurers have limited bargaining power
when negotiating commissions with banks, which has reduced their profitability. Examples is CRDB
Bank, This is one of the largest banks in Tanzania and offers a range of insurance products to its
customers, including motor insurance, home insurance, and travel insurance

4. The bargaining power of buyer : buyer power refers to the consumer's ability to impact
profitability in a particular industry. Consumers exert buyer power by demanding higher-
quality products and services for lower prices, which increases competition within the
industry. While both business-to-business (B2B) customers and individual customers have
buyer power, the types of organizations they affect differ. B2B consumers often influence
suppliers, vendors and wholesalers, while individual customer buyer power may alter retail
businesses.
The bargaining power of buyers in Tanzania's insurance market is relatively low, as insurance
products are not a priority for many consumers due to low awareness and affordability issues.
However, this is gradually changing, and insurance companies are starting to tailor their products to
meet the needs of different segments of the market.

The major components of buyer power

 The price sensitivity ; This refers to how sensitive buyers are to alterations in price.
Consumers who are more sensitive may switch to different suppliers when a price is too high
for their needs. To retain these types of customers, organizations typically reduce prices.
 Bargaining leverage ; refers to the number of buyers in an industry and how frequently they
purchase a product or service. Commercial consumers like B2B buyers often have more
bargaining leverage than retail consumers. This is because the B2B buyer population is
generally low compared to the number of suppliers. In addition, B2B buyers often make
purchases in bulk on a regular basis, which helps decrease prices per unit of product
Buyers in Tanzania’s insurance market are becoming increasingly aware of their bargaining power
due to the growth of the internet and social media, which allows them to compare insurance
products and prices offered by different providers. As a result, insurance companies are under
pressure to offer competitive pricing and innovative products to retain customers.

Moreover, in Tanzania, the majority of insurance buyers are corporate customers who purchase
insurance for their businesses. These buyers often have a higher bargaining power than individual
customers as they represent a large portion of the insurance market. Therefore, insurance
companies must focus on building long-term relationships with corporate customers to retain their
loyalty.

Additionally, regulatory bodies such as the Tanzania Insurance Regulatory Authority (TIRA) and the
National Health Insurance Fund (NHIF) also hold significant bargaining power over insurance
companies. TIRA regulates and supervises the insurance market in Tanzania, while the NHIF provides
health insurance coverage to Tanzanian citizens. Insurance companies must comply with regulations
and requirements set by these bodies to operate in the market and provide insurance products.

In summary, the bargaining power of buyers in Tanzania’s insurance market is increasing, driven by
the growth of the internet and social media, corporate customers, and regulatory bodies. Insurance
companies must focus on meeting the needs and expectations of the customers
The way the bargaining power of buyers shaping the provision of insurance service in Tanzania

through increased demand for affordable and accessible insurance products. Tanzanians, especially
those in the informal sector, are becoming more aware of the importance of insurance and are
seeking products that meet their needs and budget. As a result, insurance providers are adapting
their offerings to cater to this demand, with more affordable and flexible products such as
microinsurance and mobile-based insurance.
Through an increase in competition among insurance providers. Customers are now able to easily
compare insurance products and prices online or through intermediaries such as brokers and agents.
This has put pressure on insurance companies to offer more competitive pricing and better services
to attract and retain customers.
Through increased in customer-centric initiatives by insurance providers. Companies are now
placing a greater emphasis on customer service and experience, as they realize the importance of
customer satisfaction in retaining their business. This has led to the adoption of technologies such as
chatbots and mobile apps to improve the customer experience and streamline insurance processes.

Switching costs can significantly reduce buyer power by posing a series of obstacles that a consumer
must overcome before the switching process is complete. For example, if a business is considering
switching to a new internet provider, it might have to pay a contract cancellation fee with its current
provider, find a new provider, ensure the service is compatible with office needs, update employees
about the change and adapt to a new payment plan.

The bargaining power of buyers in the insurance industry in Tanzania can be seen through several
contemporary cases;
Increasing Use of Digital Channels: The rise of digital channels such as mobile and internet banking
has given buyers more bargaining power in the insurance industry. Buyers can now easily compare
insurance products online and purchase insurance products from the comfort of their homes. As a
result, insurance companies are investing more in digital channels to reach out to buyers and
improve their customer experience.

Expectation for Quality Services: Buyers in Tanzania's insurance industry have high expectations for
quality services. They expect insurance companies to provide fast and efficient claims processing,
personalized customer service, and convenient access to insurance products. Insurance companies
that fail to meet these expectations risk losing their customers to competitors.

Pressure for Transparent Pricing: Buyers in Tanzania are becoming more aware of the need for
transparent pricing in the insurance industry. They expect insurance companies to provide clear and
transparent information about the premiums deductibles, and other fees associated with their
insurance products. Insurance companies that fail to provide transparent pricing risk losing their
customers to competitors who are more transparent.

Increased Competition among Insurance Companies: The insurance industry in Tanzania is

becoming increasingly competitive, with more insurance companies entering the market. As a result,
buyers have more options to choose from, and they can easily switch from one insurance company
to another if they are not satisfied with the services they receive.

Therefore the bargaining power of buyers in the insurance industry in Tanzania is shaping the
provision of insurance services by driving competition, increasing demand for affordable insurance
products expectations for quality services and transparent pricing. Insurance companies that are
able to meet these demands are likely to succeed in the Tanzanian insurance market.
 5. In Porter's Five Forces Model, competitive rivalry refers to the intensity of competition
among existing players in an industry. It is one of the five forces that determine the level of
competition and attractiveness of an industry. Competitive rivalry is affected by various
factors such as the number and size of competitors, differentiation among products or
services, switching costs, and access to distribution channels. The higher the level of
competitive rivalry in an industry, the more difficult it is for firms to earn profits and gain
market share.

The rivalry among competitors in the industry is characterized by intense competition, which results
in companies engaging in aggressive marketing strategies to attract customers. The competition is
primarily focused on price, product differentiation, and customer service. Insurance companies in
Tanzania are continually seeking to differentiate themselves from their competitors by offering
unique products and services.

The intense competition among insurance companies in Tanzania has led to some negative
consequences, such as undercutting of prices, which has resulted in reduced profitability for the
companies. Additionally, some insurance companies have been accused of engaging in unethical
practices to gain a competitive advantage, such as falsifying insurance claims or failing to pay out
legitimate claims promptly.

However, competition has also led to positive outcomes, such as increased innovation and product
development. Insurance companies in Tanzania have been forced to innovate and offer new
products to remain competitive in the market. The competition has also led to improved customer
service as companies seek to differentiate themselves by providing excellent customer experiences.

The way the rivalry among competitors has impacting the provision of insurance services in tanzania
has caused significant impact on the provision of insurance The competition among insurance
companies has led
Increased pricing pressure thus price wars and aggressive marketing strategies aimed at gaining a
larger market share. This has led to companies offering more attractive insurance products and
services to customers, which has been a benefit to the consumers.

Product differentiation: In order to gain a competitive edge, insurance companies have had to
differentiate their products and services. This has resulted in the introduction of new and innovative
insurance products, as well as improved customer service and claims handling.

Market consolidation: In recent years, there has been a trend towards market consolidation in the
insurance sector in Tanzania, as smaller companies are acquired by larger players. This has increased
the concentration of the market, making it more difficult for new entrants to compete.

Improved efficiency: Competition has forced insurance companies to become more efficient and
streamline their operations. This has resulted in better risk management, improved underwriting
processes, and more effective use of technology.

Increased consumer choice: With a large number of insurance companies competing in the market,
consumers have a wide range of options to choose from. This has led to increased consumer choice
and has made it easier for consumers to find insurance products that meet their specific needs.
One example of how rivalry among competitors has impacted the provision of insurance services
in Tanzania
The intense competition in the motor insurance segment. Several insurance companies are vying
for a share of the market, resulting in aggressive pricing strategies, enhanced product offerings, and
improved customer service.
Introduction of innovative products such as usage-based motor insurance policies, which use
telematics devices to track a driver's behavior and adjust premiums accordingly. Other companies
have partnered with ride- hailing services to offer insurance coverage to drivers and passengers.
Examples is Bimatech company that offers telematics-based insurance solutions, including usage-
based motor insurance policies. Their insurance policies use telematics technology to track and
monitor the driving behavior of policyholders, such as their speed, distance traveled, and driving
patterns.

Also This competition has also led to some negative impacts, such as some companies engaging in
unethical practices, such as underpricing policies to gain market share or rejecting legitimate claims.
Additionally, smaller insurance companies may struggle to compete with larger, more established
companies, potentially leading to consolidation in the industry

Conclusion.
Porter's Five Forces model provides a useful framework for analyzing industry-level competition.
However, it has certain limitations and should be used in conjunction with other strategic tools to gain
a more comprehensive understanding of a firm's competitive position. Such limitations are Porter's
Five Forces model mainly focuses on the analysis of industry-level competition thus limited scope ,
The model assumes that the competitive forces within an industry are static and can be analyzed at a
given point in time. However, the industry dynamics can change rapidly due to technological
advancements, changes in customer preferences, and other factors. Also Identifying the key
competitive forces in an industry can be a subjective process, and there may be some overlap between
the forces. Therefore these limitations need to be addressed so that the company can use it for analysis
of the external environment.