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.

Insurance plays a fundamental role in economic development. It enables and drives

economic activity by protecting lives and property against insurable risks. Insurance
companies act as a buffer against adverse events and as the invisible glue of society.

Insurance contributes to the growth of businesses by providing coverage against

potential risks such as property damage, liability claims, or business interruption.
This enables businesses to focus on their core operations without the fear of
substantial financial losses, thereby promoting stability and growth.

Insurance is a big deal not just in the world of business but also contributes to the
economy as a whole. It has a huge impact on how businesses evolve, how people
think about economics and how the world moves forward. Insurance is the bedrock
of the economy, and while it may not be something you love, it is something you
need to support your business.

The insurance industry is one of the major players in the economy and contributes to
the world's economy. This is because they help in the smooth running of the world's
economy through the payment of insurance claims and are considered one of the
safest investments for people to have.

In a variety of ways, insurance companies contribute to the strength and vitality of

our economy.

How Does Insurance Help in Economic Development?

Insurance is a big deal not just in the world of business but also contributes to the
economy as a whole. It has a huge impact on how businesses evolve, how people
think about economics and how the world moves forward. Insurance is the bedrock
of the economy, and while it may not be something you love, it is something you
need to support your business.

The insurance industry is one of the major players in the economy and contributes to
the world's economy. This is because they help in the smooth running of the world's
economy through the payment of insurance claims and are considered one of the
safest investments for people to have.
In a variety of ways, insurance companies contribute to the strength and vitality of
our economy.

How? You may ask.

Insurance companies assist businesses in reducing risk and protecting their

employees:

As with consumers, assisting businesses in reducing risk can have a long-term

positive impact on the economy. Insurance is like the backbone of the economy.
Businesses, like consumers, can endure financial hardship as a result of unforeseen
obstacles.

When an unfortunate event strikes, insurance is one of the strongest financial tools
businesses have at their disposal to help them deal with the situation. Furthermore,
when an employee is hurt on the job, company insurance helps to cover the costs of
the person's care as well as any potential salary loss.

Business insurance also aids in the expansion of a company. At its most basic level,
insurance provides a protective safety net that allows organisations to engage in
higher-risk, higher-return activities than they would otherwise. These acts assist
firms in operating successfully, resulting in more jobs and increased overall economic
activity.

Insurance companies provide financial security to customers:

Consumers have become so accustomed to the routine that they are often unaware
of the daily onslaught of risk and uncertainty. Unexpected problems can strike at any
time, whether a car accident, house fire, a flooded basement after a major storm, or
a work injury.

By providing crucial financial protection, insurance can assist manage this

uncertainty and potential loss. When a calamity occurs, an insurance policy can help
consumers get the money they need. Many people in these situations would be
financially pressured and possibly bankrupt if it weren't for insurance.

Insurance companies help in the funding of economic development projects:

Insurance companies often invest the premiums that are not utilised to pay claims
and other operating expenses. These investments frequently finance building
construction and offer other critical assistance to economic development projects
around the country through stock, corporate and government bonds, and real estate
mortgages.

Insurance is about much more than the monthly premiums that individuals and
businesses must pay. The insurance business, as a whole, is an important thread in
the fabric of a healthy economy.

Insurance has a favourable impact on the financial system's stability:

One of the most important industries in the service sector is insurance. Insurance
firms are an essential component of the financial system. In addition, insurance
corporations have a significant role in the formation of state budgets. They are large
taxpayers in the state. Taxes, as we all know, make up a large portion of the state
budget. As a result, the insurance industry plays a critical role in maintaining the
stability of the tax and financial systems.
Insurance provides employment:

Unemployment is one of the most serious economic issues. This is a problem that
many countries are dealing with these days. In most emerging countries, the number
of unemployed individuals is rising. However, the insurance system aids in the
resolution of this economic issue by providing employment.

Insurance contributes to an increase in GDP:

GDP is one of the most important macroeconomic metrics. The volume of GDP is
used to determine each country's level of development. People can choose from a
variety of insurance plans offered by insurance firms. These premiums are used by
insurance companies in the financial and investment operations of the economy. As
a result, this process boosts the economy's GDP.

3===

Awash Insurance

General (Non-Life) Insurance

We support your everyday flow of business towards profitability, wellness and

comfortable flow of your life.

Motor Own Damage Insurance

Motor own damage insurance is an auto insurance that provides protection to you,
your vehicle, and third parties against all possible risks. This option covers a wide
array of events that can cause loss or damage to your insured vehicle as a result of
accidental collision &/or overturning; vandalism; theft; and fires. Invest in the
promise of complete protection from unforeseen financial liabilities including third
party legal liabilities as follows.
Carrier's Liability

Covers loss of or damage in delivery of goods carried by the insured which occur
during carriage and within the period of insurance from the moment the goods are
loaded on the carrying conveyance until the time of delivery and the carriage is
performed by the carrying conveyance specified in the Schedule.

Burglary and Housebreaking Insurance

The Burglary and House breaking policy ensures the insured party is compensated
for loss arising from property theft or malicious damage within the premises. There
must be forcible entry into or exit from the premises, or a violent break-in for this
policy to offer compensation. The policy will also cover the costs of repairing
damages to the premises arising as a result of theft.

Inland Transit Risk

The Inland Transit Risk policy covers loss, destruction or damage to goods by
accidental means or named perils whilst in transit and on land be it by e.g.: lorry,
train or any other land conveyance or whilst temporarily housed in the ordinary
course of transit; and within the territorial limit.

Plate Glass Insurance

Covers the accidental loss or damage of fixed plain glass and mirrors in or on the
premises of the insured, where such glass is situated and as expressly stated in the
Schedule. The policy is ideally suited for all business establishments that have plate
glass installed to enhance aesthetic appeal.

Fire and Lightning Insurance:

Fire and Lightning Insurance covers your insured property against loss or damage in
the event of a fire or lightning related perils. Often perils may occur that aren’t
directly caused by fire or lightning. With application of proximate cause, we cover:

Damage caused by water or other extinguishing agents used when an accident has
occurred

Damage by fire brigade in the execution of their duties

Property blown-up to prevent the spreading of the fire

Loss of or damage to property removed from the burning building that may have
been as a result of the removal process or rain; provided the insured takes the
necessary steps to immediately protect the removed property

Claims Handling

We provide excellent Claims service. This is our commitment.

Excellent Claims Service

In our claims handling, we are committed to ensuring claims are handled fairly and
are settled promptly, customers are provided with complete information on claims
handling and The claims handling process is supported with clear explanation as
regards the outcomes (why a claim is rejected or not settled). Every accident shall be
reported within 24 hours of the accident date.

Unique claims handling

Timeous follow up of reported claims and those in process Adopt unique,form-fitted
solutions and avoiding a one-size-fit-all approach Efficient claims processing using
our optimised digital system/platform Pay keen attention to all customer complaints
and adhering to deadlines in claimnegotiation

Unique Motor Claims Handling

Support of Awash Insurance’s preferred repair service providers Timely authorisation

of small/minor repairs Settlement of spare part cost on behalf of selected dealers
Provision of alternative options for work orders at customer preferred garages
Round the clock claim service assistance at all branches Proximity of recovery site
(the company has two recovery yards in Addis Ababa) Round the clock customer
service desk Swift dispatch of inspectors assigned to conduct investigation and
negotiation

Requirements from Customer at time of claims

Every accident shall be reported within 24 hours of the accident date.

Sources of sc risk are

The external drivers are demand side, environmental and supply side risks. The
internal drivers are process, control and mitigation/contingency. This post will
discuss these in more detail.

Risks external to the corporation can be summarised as follows:

Demand risk relates to potential or actual disturbances to the flow of product,

information and cash, emanating from within the network, between the focal firm
and its market. It is interesting to note that during the current downturn disruptions
in the cash resource within the supply chain has had a major impact on the operating
capability of organisations.
Supply risk is the upstream equivalent of demand risk; it relates to potential or actual
disturbances to the flow of product or information emanating within the network,
upstream of the focal firm. In a similar way to demand risk the disruption of key
resources coming into the organisation can have a significant impact on the
organisation’s ability to perform.

Environmental risk is the risk associated with external and, from the firm’s
perspective, uncontrollable events. The risks can impact the firm directly or through
its suppliers and customers. Environmental risk is broader than just natural events
like earthquakes or storms. It also includes, for example, changes created by
governing bodies such as changes in legislation or customs procedures.

Risks internal to the corporation relate both to how the firm addresses the external
risks and its competences to plan and execute its own business:

Processes are the sequences of value-adding and managerial activities undertaken

by the firm. Process risk relates to disruptions to key business processes that enable
the organisation to operate. Some processes are key to maintaining the
organisation’s competitive advantage while others may underpin the organisation’s
activities. It is important to recognise and classify the importance of the various
processes to enable effective risk management strategies to be implemented.

Controls are the assumptions, rules, systems and procedures that govern how an
organisation exerts control over the processes and resources. In terms of the supply
chain they may be order quantities, batch sizes, safety stock policies, etc., plus the
policies and procedures that govern asset and transportation management. Control
risk is therefore the risk arising from the application or misapplication of these rules.

Mitigation is a hedge against risk built into the operations themselves and, therefore,
the lack of mitigating tactics is a risk in itself. Mitigation needs to be considered
during the supply chain design process – if this is not undertaken the risk profile can
be increased.
Contingency is the existence of a prepared plan and the identification of resources
that can be mobilised in the event of a risk being identified. This requires all
stakeholders within the supply chain to understand what resources can be mobilised
and the procedures to do this.

4)

Logistics companies play an instrumental role in keeping the supply chain moving by
packaging, warehousing and shipping goods. In the process, they encounter
numerous risks. Insurance for logistics companies helps keep these risks under
control.

A lot can go wrong between Point A and Point B. Companies in the logistics sector
need to navigate a wide range of threats stemming from crime, technology and
nature. Major risks include cargo theft, natural disasters, cyberattacks, crashes and
derailments and nuclear verdicts.

Insurance Coverage for Logistics Companies

Logistics companies need to protect their cargo, property, workers and bottom line
against a wide range of risk events. They also need to shield themselves from
liability. Robust logistics insurance coverage can give logistics companies the
protection they need to limit their losses and continue operating.

To secure adequate coverage, logistics companies need multiple types of policies. In

some cases, coverage may be a requirement of state law; in others, it may be a
contractual requirement. For example, if you use a loan to purchase a fleet, the
lender will likely require coverage. Vendors, clients and partners may also have
insurance requirements. Finally, additional coverage types may be advisable to
manage risks.

Insurance needs can vary depending on the company and the exact nature of its
business. Common coverages that logistic companies should consider include cargo,
commercial auto, commercial property, warehouse legal liability, professional
liability, cyber and workers’ compensation insurance. Note that this is not a
complete list of insurance programs – a logistics business may need additional
coverage types.

Cargo Insurance

Cargo insurance is a type of inland marine or ocean marine insurance coverage. It

covers property in transit. Motor truck cargo insurance is a specific type of cargo
insurance that covers property being transported by truck, whereas transit insurance
is a type of inland marine coverage that covers property in transit over land.

Warehouse Legal Liability Coverage

Losses are also possible while goods are stored in a warehouse or being prepared for
shipment. If damage occurs, the warehouser may be held liable for failing to keep
the goods safe. Warehouse legal liability insurance provides protection against
property losses that occur under the care of a warehouse.

Professional Liability Insurance

Professional liability insurance is sometimes called errors and omissions insurance. It

provides coverage against claims involving mistakes, omissions and other forms of
professional negligence resulting in financial loss. Since logistics mistakes can lead to
significant losses, this can be an important coverage type for freight forwarders.

Commercial Auto

Commercial auto insurance is essential for any business that uses drivers. Logistics
providers need to meet state insurance requirements and secure adequate liability
coverage in light of rising jury awards and nuclear verdicts.
Commercial Property Insurance

Commercial property insurance is important for any logistics company with a

physical location, whether a warehouse or an office. Coverage may apply to the
building as well as to equipment and other property the company owns.

Cyber Insurance

Logistics companies are increasingly reliant on technology and smart devices. As a

result, these companies are also vulnerable to phishing, ransomware and other types
of cyberattacks. Cyberattacks can be expensive – they often involve business
interruption, system recovery costs and even regulatory and legal costs. Since other
types of insurance coverage may exclude these losses, cyber insurance provides
important protection.

Workers’ Compensation

Since many work-related injuries involve transportation accidents, the logistics

sector has a high injury rate. Accidents can also occur in warehouses. According to
the National Safety Council (NSC), the transportation and warehousing industry
experienced the highest number of injuries and illness involving days away from
work in 2021. A robust workers’ compensation program can control losses and
protect workers.

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Way of premium payment

There are two main types of premium payment structures regarding price variability:
level premiums and flexible premiums. In a level-premium insurance policy, the
policy premium remains the same throughout the life of the contract. The premium
payment only funds a death benefit and there is no savings component in this type
of policy. A flexible insurance policy allows a policy owner to change the face amount
of his/her coverage as well as the payment amount and frequency to suit his/her
changing circumstances. This type of policy has a death benefit as well as a savings
component.

Premium Payment Modes

Let's meet Sally, who plans to purchase life insurance. Sally's agent indicated that
she has flexibility when it comes to how often she pays her policy premium.
Premium payment represents the cost of the insurance policy and Sally wants some
advice on which policy to select, how often to pay her premium, and policy
provisions. Let's see if we can help her.

Mode refers to the frequency with which a policyowner makes premium payments.
If Sally decides to purchase insurance, she could pay her premiums:

Annually

Semi-annually

Quarterly

Monthly

An annual payment would require Sally to pay her premium once a year. This would
be the most affordable option for her, since the insurance company wouldn't spend
as much time and money processing payments. While this option would be best
from a cost perspective, Sally would have to determine if she can afford to pay this
premium all at once.
If Sally chose a semi-annual payment, then she would pay her premium every six
months (twice a year). Her premium payments would be a bit higher than if she
chose an annual payment frequency, but it might be easier for her to budget for two
smaller payments instead of one larger one.

A quarterly payment would require Sally to make a payment every three months
(four payments a year). Sally would find it easier to budget for four smaller
payments, but her policy premium would be higher.

A monthly payment would require Sally to pay a premium every month (twelve
times a year). This option would be the best for Sally's budget as she would pay a
smaller amount every month. However, it would likely have the highest policy
premium, since the insurance company would need to process these twelve
payments per year.

Sally also has to decide whether she wants flexibility over the premium amount she
pays. For example, she could select a level-premium policy or a flexible premium
policy. Let's take a look at each of these policy types.

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How indemnify the insured

The indemnity requires the insurer by restore the insured to the same financial
position same as the insured was immediately before the loss or to the nearest
position before the loss. This principle makes sure underwriter pay for the damage of
the insured.

With indemnity insurance, one party commits to compensate another for

prospective loss or damage. In insurance policies, in exchange for premiums paid by
the insured to the insurer, the insurer offers to compensate the insured for any
potential damage or losses.

Indemnity can be defined as a contractual obligation to compensate an individual or

business for damages or losses they experience. Put another way, an insurance
company indemnifies a policyholder by restoring them to their prior financial status,
or making them “whole” again, in the event of a covered event or peril.

The Bottom Line

Indemnity is a type of insurance compensation paid for damage or loss. When the
term is used in the legal sense, it also may refer to an exemption from liability for
damage. Indemnity is a contractual agreement between two parties in which one
party agrees to pay for potential losses or damage caused by another party.
Typically, an insurance contract dictates that the insurer, also known as the
indemnitor, agrees to compensate the other party involved (the insured or the
indemnitee) for any damage or losses in return for premiums paid by the insured.