Abel Tiemtoré is a lecturer and researcher in insurance markets at Thomas Sankara University. In this interview, he discusses the place and role of scientific research in the development of insurance in the CIMA zone, majorly French-speaking West and Central Africa.
He also discusses the lack of collaboration between the insurance industry and the world of research, as well as the difficulties faced by insurance researchers in this region.
As a researcher interested in insurance issues, what is your assessment of the insurance market dynamics in the CIMA zone, compared with other African and even Western markets?
The insurance market in the CIMA zone is very dynamic compared with other African and even Western markets. Premiums in the CIMA zone are growing very strongly, among the highest in the world. Growth is even more remarkable in life insurance. The average growth rate is around 8% for all premiums combined in the CIMA zone; in Burkina Faso, it is around 10% per year, whereas, for the whole of Africa, premiums have been contracting for more than five years.
What is the place and role of scientific research and researchers in insurance development in the CIMA zone?
Research has an important role to play in the development of insurance in the CIMA zone. Firstly, research must inform the design of insurance contracts. One of the weaknesses of the insurance sector in the CIMA zone lies in the design of contracts, which does not take sufficient account of certain socio-economic realities.
Research is needed to help applicants make better choices about the contracts they can offer. Researchers enjoy a certain degree of neutrality compared with insurance company players. Research should also guide the public authorities in supporting and regulating the insurance markets.
However, the use of scientific research is not common. Insurance companies sometimes call on researchers on an ad hoc basis, for example, to launch a new product; this was the case in Burkina Faso, for instance, during the launch of agricultural insurance, where a study covered the West region and the Boucle du Mouhoun.
What explains or justifies the lack of interest in research in the insurance sector in the CIMA zone?
There is very little research interest in the insurance sector in the CIMA zone, compared with other African markets, such as the English-speaking zone (Ghana, Nigeria, etc.). I think the market is too centralised in the CIMA zone, which gives the impression that research has too little chance of getting things moving in this area.
Which insurance-related topics are of interest to researchers in the CIMA zone or have already been the subject of research in the CIMA zone? Has this research produced results that have helped to develop the insurance sector?
Insurance research, as far as economists are concerned, can be grouped into two main categories: research with a macroeconomic orientation based essentially on the contribution of the insurance sector to economic growth, and therefore to GDP; and research with a microcosmic orientation, which is interested in the operation of insurance markets.
In the CIMA region, economists have been more interested in the macroeconomic aspects of insurance, and very little research has focused on the functioning of markets, price formation and contract design. However, some researchers have shown an interest in the determinants of insurance demand.
As far as I am concerned, this research has contributed little to the development of the insurance sector in the CIMA area. For example, in the choice of pricing variables for motor insurance, the variables selected are not necessarily those that best explain the level of risk of the policyholder; ethical or legal issues prohibit the use of certain variables even if it is proven that they play a significant role in the risk of the policyholder (for example, the gender or age of the policyholder, etc.).
Has research ever looked into the factors slowing down or hindering the development of insurance in the CIMA zone?
Some researchers have pointed out the poverty of the population, which relegates insurance issues to second place, with insurance perceived as a luxury item. Others blame the market, which is out of step with reality, a mismatch between supply and demand. I think this is where research is most needed.
Personally, what insurance-related subjects have you worked on? And what were the main results?
In our doctoral thesis, we were interested in insurance contracts. The thesis title was ‘Information Asymmetry and Contract Options in Insurance Markets in Developing Countries’, where we showed that contracts are such that low-risk policyholders subsidise high-risk policyholders (cross-subsidisation).
After the thesis, we turned our attention to agricultural insurance, particularly the basic risk (risk of non-alignment between crop loss and compensation received), and how contracts can be formulated to reduce this type of risk. In terms of the thesis, the main conclusion was to propose a bonus-malus system capable of correcting classification errors in the long term and moving a priori unfair pricing towards much fairer a posteriori pricing.
In terms of agricultural insurance, we have proposed the use of more advanced modelling (fuzzy sets) to reduce the basic risk; in addition, we have proposed income insurance rather than production insurance.
Is there any collaboration between the research community and the insurance industry (insurance companies, umbrella organisations, regional organisations such as FANAF and CIMA)?
There is collaboration. However, it is not only weak but also informal. The various players would benefit from formalising this collaboration for better development of the insurance market in the CIMA region.
What bridges should be built between researchers and insurers to improve the development of the insurance sector in the CIMA region?
The insurance market in the CIMA zone is not research-oriented, perhaps because research is costly for an individual insurance company, especially as it cannot exploit the research results on its own (it would soon be copied). I think that collaboration should take place at the national or even sub-regional level.
Do the public authorities provide specific support for insurance research in CIMA countries? If so, is this support substantial?
To my knowledge, there is no such support. It is only very recently that the public authorities have taken an interest in the insurance sector, with the promotion of universal health insurance in most CIMA member countries.
The public authorities are also involved in agricultural insurance, which is being tested in some countries. However, this renewed interest on the part of the public authorities in insurance issues has not been accompanied by renewed interest in research in the sector, which may doom these various initiatives to failure.
The national umbrella organisations of insurance companies, such as the Association Professionnelle des Sociétés d’Assurance (APSAB), have a role to play. They better understand the sector’s issues and can influence public authorities and even decisions at the CIMA level.
For example, they can advocate greater autonomy for insurance companies and include researchers in their ranks to support them on certain points in negotiations with their counterparts. They can also initiate research projects in specific areas. Organising prizes for outstanding researchers could be a form of motivation. However, we need to start by making the data accessible to researchers.
What are the main difficulties researchers encounter in the CIMA zone in their research projects on insurance issues? And what can be done about them?
The main difficulty lies in funding research. As you know, research in general in our countries is largely funded by outside NGOs that do not see insurance as essential for our economies.
When you look at doctoral research offers, for example, it is very rare for grants to be awarded for insurance research in our area. I think that close collaboration between researchers and insurers would be the start of a solution.