The Ethiopian Insurance Corporation (EIC) is to begin a new insurance policy, known as Tourists All Risk Insurance, intended to cover losses for domestic and international tourists. The policy is introduced in response to a decline in tourism proceeds following the recent unrest in some parts of the country, which has resulted in travel bans.
The primary rationale behind the policy is rebuilding travellers’ confidence after the past year’s unrest and the 10 month long state of emergency, according to Netsanet Lemmesa, CEO of EIC.
“Any tourist who buys the policy will be able to get compensation if anything happens to them or their property,” he said.
EIC unveiled the new product a year after the country had lost investments worth hundreds of millions of Birr owing to the damage incurred to life and property during the unrest in Oromia and Amhara regional states, which reached its peak during the last November. Following the turmoil, the country has been under a state of emergency until the past month.
The unrest has resulted in a loss of tourist’s appetite to visit the country, with tourist arrival in the first half of the past fiscal year declining by 12pc to 478,890.
“There have been repetitive requests from the Ministry of Culture & Tourism,” said Netsanet. “It is the right time to launch the policy.”
EIC will avail the new policy both for short and long term periods depending on the preference of the tourists. The policy holders can buy the policy for a specific travel period or as an annual package.
With the aim of providing the service in no less than a month, the Company has already signed an agreement with the 137 years old German reinsurer, Munich Re, which globally services around 35 million clients.
A veteran industry insider applauds the move by the Corporation.
“It is the right time to launch the policy considering the Firm’s strength and experience in the industry,” said a financial expert with three decades of experience. “It is also important for the company to earn a good chunk of foreign currency.”
However, Abdulmenan Mohammed, a financial and audit expert with 15 years of experience, has reservations about the applicability of the new system.
“The recent crisis entails too many risks for tourists that it is unlikely they will be willing to visit the country just because of a new insurance policy,” he said.
For Abdulmenan, unless the new policy becomes mandatory for the traveller, tourists will not spend extra money for leisure travel as the insurance would probably have expensive premium.
“The product will not bring much revenue to EIC as it is a gesture by the government to boost the confidence of tourists,” Abdulmenan commented.
“The serious problem that EIC will be facing is the pricing of the new policy since it has not had any previous experience in this area. So setting the right price will be difficult. Moreover, if there is no adequate market, the insurance policy may not sustain itself,” he added.
EIC has a plan to provide the policy through Ethiopian embassies in various countries, according to Netsanet.
The new policy will be launched in the coming month along with political violence insurance coverage, which aims to protect companies from risks that arise due to public unrest or violence. During the same period, the company also plans to start insurance coverage for real estate developers and three-decade old vehicle owners.
All of the policies for the moment have yet to be approved by the National Bank of Ethiopia (NBE).
Founded in 1976 with a capital of 11 million Br, EIC was established after thirteen private insurances were nationalised. Up until the 2015/16 fiscal year, the company had a capital of 835.6 billion Br. It also employs 1,475 people.
The company, having an insurance coverage of 1.7 trillion Br, grossed a profit of close to 700 million Br in the recently concluded fiscal year – which was 25pc higher than the preceding budget year.
With a launch of the new products, the company targets to raise its premium production by 20pc to 3.2 billion Br in the current fiscal year. By the same token, it plans to boost its profit to 838 million Br.
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