BG: Please share the challenges that Botswana Life is facing now and how are you managing them?
Cathrine Letegele: One of the biggest challenges faced by Botswana Life relates to economic activity in the country. A high unemployment rate affects the affordability of financial services such as insurance by households. It reduces the size of the potential market that Botswana Life could be tapping into for business. One of the ways in which we have been managing this, is through the creation of products and solutions that cater for all market segments as well as increasing our distribution channels. We are so far the only life insurance company that has successfully developed products that service everyone including the unbanked. Statistics have also shown that there is a high level of household indebtedness in the country, which also affects disposable incomes and affordability of products and services. The high level of indebtedness also results in individuals cancelling the insurance cover held with us, in order to use the limited financial resources for other household needs. This has an adverse effect on our business, as it reduces our income, our file size and our profitability as a business. In order to manage this, Botswana Life has implemented a conservation campaign for its existing clients to educate them about the importance of life insurance, and reinforce their decisions for taking up our products. It is also evident that the level of financial literacy in the country is still a challenge; there are still knowledge gaps in the market about investing, saving and insurance. This affects the level of understanding of the solutions we offer and their relevance. It results in poor financial decisions for individuals and families, such as not investing enough, not planning for retirement, cancellation of insurance policies and lack of a saving culture. We will soon be embarking on a financial literacy campaign to help demystify personal financial planning for Batswana. Our objective is to create a market that is financially savvy and that takes sound, informed financial decisions.
BG: There is mushrooming of other life insurance companies in the industry, what is Botswana Life doing to ensure the company remains the number one life insurer?
Letegele: For almost 20 years, Botswana Life was the only life insurer in the market whereas today there is a total of nine (9) registered life insurers. This increase in competition is good for businesses and consumers because it keeps the industry vibrant; challenges companies like Botswana Life to be innovative; and offers consumers a wide array of products and services to choose from. Therefore we welcome it. Our strategy for retaining our market share despite the increase in competition is to remain innovative in our offering. Over the years, we have innovated in technology, products and services. Botswana Life is the only company locally with an administration system that has the portability to allow us to service our customers from anywhere, as long as there is Internet connectivity. We have also been a pioneer with our product offering, launching a number of very creative products to suit the needs of a diverse portfolio of clients. In 2013, we launched Lifer ewards, a prepaid payment card for our clients to receive their benefit payments in, and use continuously for transacting online, on ATMs and point of sale infrastructure. This is the only card of its kind in Botswana, and in Africa outside of South Africa. Our micro-insurance products were also a first for Botswana at the time that we launched them. We are continuously improving our service to our customers by increasing the number of touch points through which they can access our services; Botswana Life is the only life insurer with a Call Centre in Botswana, which offers our clients convenience. These are just a few of the strategies we are employing in order to remain competitive in the market.
BG: What is Botswana Life’s market share currently?
Letegele: The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) estimates our market share at 75 percent.
BG: The Govt. recently revised the insurance industry bill. What are some of the aspects that you would have wished to be improved and what are those that you are welcoming in the bill as an insurance company?
Letegele: The Insurance Industry Bill has been shared with the industry for comments and is expected tobe e passed in the July Parliament sitting. Botswana Life has provided its input on the Bill, and at this stage, it is premature to share our comments publicly as the Bill is still in front of Parliament. Notwithstanding that, the proposed Act is a welcome development especially that it aligns with best practice and international standards. Among other things, the Bill avails detailed processes and duties relating to the insurance industry in one piece of legislation as opposed to the Insurance Industry Act of 1987.
BG: Since your appointment in 2010, what would you say has been your contribution to Botswana Life that has brought spin-offs to the company?
Letegele: I am cautious to single out my individual contribution as I believe that whatever the company has achieved is a result of a collective effort. We have a number of achievements that one can talk about, for instance; ably and successfully navigated through very choppy conditions following a very challenging economic period during the recession, and delivering real growth for our clients and shareholders. This is evident in the doubling of policyholder assets and increase in profitability. Innovating through technology and introducing a portable web-based system which we use to deliver service anywhere outside of our normal branch network. We do this through an initiative “taking service to the people.” Introduction of unique insurance solutions, one of which pays a monthly benefit of up to P4,000 to dependents of a policyholder for a period of 12 months following the passing on of the policyholder. In 2013, we launched the Life rewards visa card, primarily a benefit payment card providing convenience and security for our clients, while also helping them to save through discounts with a number of merchants in the country. With the introduction of this card, we are able to pay benefits, claims in a matter of minutes, NOT days! To date, we have issued more than 40,000 cards and paid over P270million through this card. We love the card because we issue it to everyone, including those dependents that were previously excluded from financial services due to certain minimum requirements. Financial inclusion is very much top of mind as we go forward into the future. Another great success is that in four (4) years, we have been able to double BLIL’s assets under management from P3.5billion to just over P8billion. Our recurring premium income will soon exceed the P1billion mark. This is an incredible achievement given the tough economic conditions.
BG: How is the bancassurance model performing so far since it was first introduced?
Letegele: Bancassurance is another distribution channel that we have added to our model, once again to increase the reach of our product offering. Through our partnership with Standard Chartered Bank, we distribute several products to consumers; being funeral cover, life cover and hospital cash products. The partnership is gaining momentum and the results very much reflect this momentum. We are very excited about the future prospects of this channel.
BG: Botswana Life and other competitors had previously highlighted on acute shortage of pula based long term matching assets for the annuity liabilities as a major challenge. Please elaborate further on how this is a challenge and what has been the solution by Botswana Life to this?
Letegele: The challenge is that annuity liabilities are long term in nature and the company commits to a particular rate of return to be given to the annuitant upfront –which guarantees the annuitant a certain stream of cash flow going into the future. In order to reduce the risk of loss due to fluctuations in interest rates, annuities must be backed by fixed income assets with a guaranteed rate of return (low risk assets). These assets should typically be government bonds which have a zero risk of default. The requirement for long dated paper is to overcome the reinvestment risk associated with changing interest rate environments over time. In an effort to overcome this challenge, Botswana Life has invested in credit bonds or corporate bonds. This is in addition to government bonds, which are limited in supply. We are pleased that ongoing discussions with government are bearing fruit. Just last week, we saw government issuing a new bond BW012, a 25- year bond. This is a welcome move which, if the bond is regularly issued, should go a long way to help us and other annuity providers match these long term liabilities.
BG: CSR has now become part of every commercial enterprise. Explain in detail your CSR projects.
Letegele: Botswana Life is part of the BIHL Group of companies. In 2008, BIHL Trust was formed to serve as the CSI vehicle for the Group. Botswana Life contributes 1 percent of its profit after tax to BIHL Trust annually, to enable various projects to be undertaken. Since inception of the Trust to 2008, Botswana Life has contributed P11.3million to the Trust to enable its mandate. Some of the major CSI projects that the Company has undertaken under the banner of BIHL Trust, include a P2, 1million investment in the construction of a multi-purpose hall for Gamodubu Child Care Trust; over P600, 000 on the construction of a school library for Kuke Primary School; P450, 000 towards post-graduate studies for six (6) beneficiaries of the Thomas Tlou Scholarship in 2013 as well as donation of P1, 2million to Maru-a-Pula School’s Orphans and Vulnerable Children programme. These projects are just some of the many implemented under the CSI programme ever since it was put in place. Others include contribution to creating awareness about breast cancer with the Journey of Hope Botswana, as well as contributing to sports development in the country through our Botswana Life Classic Run, previously known as Up Kgale Marathon.
BG: What are BLIL future prospects in the insurance industry?
Letegele: I believe that the future is bright for Botswana Life. With the newly launched strategy we aim to not only grow our topping but also ensure that Botswana Life remains the market leader and continues to innovate and pioneer the industry. The strategy is very ambitious and it’s going to keep us very busy for the next five years. This year also marks the 40th anniversary of Botswana Life; this is a huge milestone that we are very proud of. We look forward to the next 40 years being even better than the last 40, for the benefit of all our stakeholders. This year, we will celebrate the 40th anniversary and the launch of the new strategy with a refreshed corporate identity for Botswana Life. These are indeed exciting times for the business and we look forward to all the opportunities and challenges that the future has in store for us.
NOTE: BG Business has gathered that BLIL has for the 2014 financial year once again become the BIHL’s largest contributor to the group’s earnings with 63 percent or P360million. The value of new business increased by35 percent. Also in the year under review, in the life insurance business, the group was recognised for the Sanlam Emerging Markets Cup of Nations Award. More to that, Letegele earned recognition in the Sanlam Group CEO’s Eagle Award and also became a finalist in the Life Insurance and Market Research Association awards under Africa’s Most Influential Women in Business and Government 2014.