Shareholders of Nile Insurance S.C. compelled their board of directors to please employees, brokers and agents of the company as they are the horses who drag the cart that will take the company to growth and development.
At the 18th Ordinary Annual and 15th Extra-Ordinary General Meeting the insurance company held at Hilton Addis on Nov. 20, 2012, most shareholders of the company were very much concerned about their insurance company’s market share decline which they believed resulted from, among other reasons, an adverse work environment for employees, unnecessary wrangling with brokers and agents, and needless rivalries with other companies in the industry.
The board of directors reported a 267 million birr premium from general insurance which has shown a 45 percent increase from last year, attributed to the increase in premiums of almost all classes of business. The net earned premium, according to the report, was 189 million birr, up 39 percent from the previous year. The report indicated that this resulted from the significant increase in premiums in the motor insurance business. The company’s profit before taxes has also increased by 75 percent to 37 million birr, according to the report.
“The company has apparently registered record profits. However, the board cannot brag about it, as this progress does not necessarily reflect the company’s good work, and might also be attributed to the continuing economic progress the country registered over the last decade that has contributed to the success in different sectors, including the insurance industry,” said one shareholder at the general meeting.
Despite the fact that the company registered noticeable progress, shareholders remained dissatisfied, as they believe much more would have been achieved had the company created a favorable working environment for employees, brokers and agents. The Insurance Supervision Directorate of the National Bank of Ethiopia (NBE) also said the country’s economic progress has resulted in a four billion birr rise in insurance premiums, which was also discussed on Nile’s Auditor’s Report and Financial Statement booklet. The third party motor insurance proclamation issued by the government, which was also mandatory, has significantly contributed to the sharp rise in income from premiums in the fiscal year. Ongoing activities in public investment, agricultural transformation, export, and manufacturing also have contributed to the substantial opportunities for the insurance sector’s progress, according to NBE.
Many shareholders expressed their concern about Nile’s market share decline. Shareholders asked the board to explain why many insurance companies established long after Nile are performing better than the latter in terms of market share.
Masresha W/Sellassie, Chairman of the Board of Directors for Nile, said the issue with brokers sprang from the board’s decision on the reduction of motor insurance rates, from 10 percent to 7 percent, to reduce the 20 percent in losses to the company which came about when the brokers and agents increased the risk factor to the company. The motor insurance portfolio of previous years was 70 percent of all insurances of the company. As a result of the latest decision, this amount decreased by 10 percent, which enabled the company to decrease loss. “Brokers were bringing old car insurances to Nile while giving other profitable insurances to other companies. The board learned that the company’s losses are due to this decision,” he said.
The chair said that the members of the board believe that brokers and agents are very important, but they shouldn’t always be entertained at the cost of the company’s survival; therefore, to settle the issue, the board had to take necessary measures for the benefit of the company. Besides negotiating with brokers and agents, the company increased the number of branches to enhance the company’s income by promoting insurance sales. This was the only contentious issue that the brokers have with the board, according to the chair. The board did what was best for the company and seemed to have no regrets. “There was a conflict of interest and it had to be done,” the chair said. “We will try to find other options that would satisfy the brokers without harming Nile.”
Shareholders are also concerned about employee turnover which they said is making Nile “a training institution rather than an insurance company.” They assumed that this was because of an unfavorable work environment. “Employees are not free to generate ideas and pass decisions that would benefit the company. Some are even saying that they have been insulted for doing just that” they said.
The board denied the accusation. “I personally haven’t heard anyone saying they have been insulted and/or given a cold shoulder.” He underlined the fact that no one in the board would fail to realize the significance of a single employee of the company. “We, nevertheless, discuss issues and make comments to each other to find a better way of going about our business, but this should not be misconstrued as insulting and snubbing.”
The high turnover, according to Masresha, is because of the many newly established insurance companies’ interest and ability to take Nile’s employees. “We couldn’t retain workers as the new companies are paying a lot of money, which we can’t afford to,” he said. “We have also increased salaries and given bonuses. Unfortunately, it’s impossible to entertain everyone’s demands.”
According to the report, the company plans to focus on branch expansion, development, and creating new insurance products, further developing a presence in new markets within operational areas and enhancing business relations and collaboration with market partners, besides improving services. Nile has obtained a permit from Addis Ababa City Administration to construct a 26 storey building for its headquarters around the National Theatre. The final design for the building has been prepared and construction will begin in January 2013, according to the report.