Determined to increase market penetration in 2022, African insurers have identified the need to embrace digitalisation for better distribution of products and increased coverage for small and medium-scale enterprises (SMEs).
The industry, which has largely depended on corporate clients and institutions for too long, says it must at this time service the African population, small businesses with micro products that deal with the protection of life, health, and assets, including their farmlands.
Tope Smart, president, African Insurance Organisation (AIO), says the major focus this year 2022 is to seek ways that will help the industry deepen penetration.
Smart, in his New Year message to the African insurance fraternity, says the penetration rate in Africa remains low when compared with the global average.
To this end, Smart, who is also the group managing director of NEM Insurance plc, stresses, “We need to bridge this gap by addressing all the challenges confronting us as a sector in Africa. With determination and commitment, we can do this.
“We have the population but we have not been able to serve them well, so digitalisation is critical in reaching out to this large number of people in our continent.”
He states that the insurance industry is growing bigger, stronger, and more resilient, adding that as we work together on several projects, which we believe will bring us closer and make us stronger, we shall become great.
Daniel Braie, managing director/CEO, Linkage Assurance plc, says we have a large number of SMEs that we need to provide protection for their businesses and assets.
According to Braie, the experience of SMEs in 2020 after the EndSARS protest in Nigeria is a reminder that every business should have insurance, and as operators, we are deepening our marketing of these products to make sure many of our people in Africa benefit.
Every report including that of McKinsey and Company published in 2020: ‘Africa’s Insurance Market is set for take-off’ points to the fact that penetration is key in growing the continent’s market.
Read also: Insurance eye tech, SMEs for growth in 2022
With huge potentials in terms of population, demography favouring the middle class, rich natural resources, every eye is on the continent to develop its insurance potential for robust economic growth, experts say.
According to the Mckinsey report, most of the growth recorded in the insurance industry in the continent has come from the economic expansion of these countries and regions, not because of increased penetration, pointing to an opportunity for the players.
Africa’s insurance industry is valued at about $68 billion in terms of gross written premium (GWP) and is the eighth largest in the world, although this is not equally distributed across the continent.
Markets are inconsistent in terms of size, mix, growth, and degree of consolidation, with 91 percent of premiums concentrated in just 10 countries.
South Africa, the largest and most established insurance market, accounts for 70 percent of total premiums. Outside of South Africa, we see six primary insurance regions in Africa. In the Southern Africa region, 54 percent of premiums are for life insurance. Non-life insurance, however, plays a larger role in Anglophone West Africa, North Africa, East Africa, and even more so in Francophone Africa.
The level of maturity in these six regions is low, relative to global reference countries, as measured by insurance density (premium per capita).
While most African countries have experienced double-digit insurance growth in compound annual growth rate (CAGR) in local currency over the last five years, this has mostly been driven by economic growth, rather than deepening market penetration.
Levels of insurance penetration in Africa are half the world average measured as a percentage of GDP, and premiums per capita are 11-fold lower than the world average.
The bulk of the growth in Africa is likely to come from pensions and individual life insurance, which is the fastest-growing line of business on the continent, although starting from a smaller base compared with nonlife insurance.
While motor insurance is the largest contributor to nonlife insurance, driven by requirements for a compulsory minimum level of insurance, often a third-party liability in countries like Morocco, Kenya, Nigeria, and Egypt, accident insurance, health insurance, and property insurance have all shown faster growth in recent years.
The prospects for growth in commercial lines are also good.
In Nigeria, for example, commercial insurance has performed strongly, with oil and gas growing at 9 percent per annum and marine and aviation at 10 percent per annum between 2014 and 2018.
In 2018, oil, gas insurance, marine, and aviation insurance accounted for 34 percent and 11 percent, respectively, of non-life gross premiums in that country.
In Ghana, the Ghana Oil and Gas Insurance Pool (GOGIP) almost doubled from $25 million in 2016 to $48 million in 2019 and represents approximately 15 percent of total non-life premiums in that country.
Across the continent, distribution channels also vary by region as well as between life and non-life products. Brokers and agents remain the most prominent channels, although direct sales and bancassurance have increased their share.
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