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Stakeholders express optimism in Africa’s market


Chief Executive Officer (CEO), Allianz Global Corporate & Specialty Africa, Delphine Maïdou.

Despite its numerous challenges, major Western insurance firms are beginning to pay attention to the increasingly attractive sub-Saharan African insurance industry. Most insurance markets in the developed world are highly mature. Intense competition has also made Africa’s dynamic, underserved markets increasingly alluring.

South Africa, one of the region’s most advanced, accounted for almost 75 per cent, or $51.6billion, of all insurance premiums on the continent in 2013, according to global reinsurance firm, Swiss Re.

However, South Africa’s dominance is set to be challenge by a number of promising countries. Nigeria tops the list.The Chief Executive Officer (CEO), Allianz Global Corporate & Specialty Africa, Delphine Maïdou, said: “Nigeria is Africa’s largest country by gross domestic product and has a mere 0.6 per cent insurance penetration. It has all the ingredients for a thriving insurance industry because of its vast population of 170 million and active economy.” Maïdou also points to Kenya and Ethiopia, as significant up-and-coming insurance markets, “especially due to the size of their population and growing middle class.”


Although the penetration rate for insurance in Kenya stood at only 2.75 per cent in 2013, the market has grown by over 15 per cent each year from 2010 to 2013. Premiums reached $1.5billion.

The recent $350millio investment partnership between Prudential Financial and LeapFrog Investments, which targets high-growth insurance markets in Africa, is a clear sign that global companies are keen to tap into this potential.

Also, high mobile internet penetration rates across sub-Saharan Africa, forecasted to rise to 37 per cent by 2020, are giving insurance firms new avenues to reach consumers.

In February, France’s largest insurer, AXA, announced plans to invest €75million ($87.27millio) in Africa Internet Group, in order to “become the exclusive provider of insurance products and services through Jumia, and other AIG platforms across Africa.” Jumia is a Nigerian online retailer with warehouses across the region.

According to Swiss Re, Africa’s insurance penetration rate only totalled 3.5 per cent in 2013, while digital platforms are well positioned to reach uninsured consumers.
But international insurance companies must be aware of each African market’s unique needs, experts said, as simply transplanting products from other regions will not necessarily work.

The Marketing Director at MicroEnsure, Peter Gross, explained that: “Products from London do not work in Luanda, so foreign investors will need to quickly identify how best to adapt their core capabilities to find success on African soil.”

Even with the proliferation of digital methods to purchase insurance solutions, the significance of personal contact should not be discounted. Many African consumers are happy to complete financial transactions online, but some still want the security of buying face-to-face from a reputable provider.

Insurers are now lobbying through trade associations to make insurance mandatory for a number of assets from cars to houses. Insurance policies for such property are required by law in many Western countries, but African governments are slow to sign similar regulations into law.

Issues around affordability remain the main reason for opposition to such mandatory insurance laws, with poorer populations unlikely to welcome costly new regulations.
Enforcement of compulsory insurance may also prove difficult in countries with lacklustre government infrastructure. The shortage of verified insurance outlets is also making it hard for Africans to purchase sufficient coverage.

The Nigerian Insurers Association (NIA) restated its support for compulsory insurance measures earlier this year, a series of fires caused widespread damage across markets in Nigeria.

Despite the fact that there are a few laws ordering citizens of African countries to purchase insurance, the sector as a whole would expand rapidly if even minor progress were made in this area.

The Media Relation’s officer at AXA Group, Jean-Baptiste Mounier, added that market growth has been boosted by government reforms such as mandatory motor and group life insurance.

Lloyd’s head of Middle East and Africa, Cameron Murray, said, while Africa’s insurance penetration rates show a major opportunity, there are still unique obstacles to be overcome.“It can be challenging for insurers to explain their relevance and the importance of the insurance product directly to African consumers,” he added.


He notes that the industry is hampered by “a lack of trust in institutions, reliance on the informal economy, underdeveloped financial markets and poorly capitalised domestic insurers.”

A less discussed, yet nonetheless important, factor that could pose a risk to growth in the African insurance market is the region’s lack of skilled actuaries.Effective risk management, alongside a tailored product offering, are vital to bringing more Africans into the market, but unless more focus is given to training new actuaries, insurance firms will struggle to meet consumers’ needs.Despite these challenges, insurance professionals are starting to set their sights on Africa’s potentially lucrative markets.

“In Africa you find some of the fastest growing economies worldwide, dynamic demographics and a very low penetration rate for the insurance industry. This is a land of opportunities for the insurance sector,” said Mounier.


In this article:
Delphine Maïdo
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